(To
Prospectus Dated March 1, 2005)
2,387,850
Shares
We
are
offering 2,387,850 of our ordinary shares to selected investors pursuant to
this
prospectus supplement and the accompanying prospectus. The ordinary shares
will
be purchased at the negotiated price of $1.75 per share.
Our
American Depositary Shares (“ADSs”), evidenced by American Depositary Receipts
(“ADRs”), are traded on the Nasdaq Capital Market, the principal trading market
for our securities, under the symbol “AMRN”. There is no public trading market
for our ordinary shares. On March 28, 2006, the closing sale price for our
ADSs, each representing one ordinary share, on the Nasdaq Capital Market was
US$3.37.
SEE
“RISK FACTORS” ON PAGE 4 OF THIS PROSPECTUS SUPPLEMENT, IN THE REGISTRATION
STATEMENT ON FORM F-3 (NO. 333-121760) AND THE DOCUMENTS INCORPORATED BY
REFERENCE HEREIN, TO READ ABOUT FACTORS YOU SHOULD CONSIDER BEFORE
BUYING THE SECURITIES.
|
Per
Share
|
Total
(1)
|
||||||
|
Offering
price
|
$
|
1.75
|
4,178,738
|
||||
|
Offering
Expenses (2)
|
$
|
0.04
|
90,441
|
||||
|
Proceeds,
after expenses, to us
|
$
|
1.71
|
4,088,297
|
||||
|
(1)
|
Assumes
that all 2,387,850 ordinary shares offered by this prospectus supplement
are sold in this offering. There is no requirement that any minimum
number
of ordinary shares or dollar amount of ordinary shares be sold in
this
offering and there can be no assurance that we will sell all or any
of the
shares being offered.
|
|
(2)
|
Offering
expenses primarily represent stamp duty payable, finders fees and
legal
costs.
|
We
have
not engaged any placement agent to solicit offers to purchase our ordinary
shares in this offering. No placement agent is purchasing or selling any of
our
ordinary shares or ADSs pursuant to this prospectus supplement or the
accompanying core prospectus, nor are we requiring any minimum purchase or
sale
of any specific number of ordinary shares or ADSs. We expect the total offering
expenses to be approximately $90,441. We expect that delivery of the ordinary
shares being offered pursuant to this prospectus supplement will be made to
investors as soon as practical after March 31, 2006. Unless the purchasers
instruct otherwise, the ordinary shares will be delivered in the form of ADSs
in
book-entry form through The Depository Trust Company, New York, New
York.
NEITHER
THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION
HAS
APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS
SUPPLEMENT OR THE ACCOMPANYING CORE PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The
date
of this prospectus supplement is March 30, 2006.
TABLE
OF CONTENTS
Page
|
About
This Prospectus Supplement
|
S-1
|
|
Note
Regarding Forward Looking Statements
|
S-2
|
|
The
Offering
|
S-3
|
|
Risk
Factors
|
S-4
|
|
Use
of Proceeds
|
S-5
|
|
Capitalization
and Indebtedness
|
S-6
|
|
Dilution
|
S-7
|
|
Plan
of Distribution
|
S-8
|
|
NASD
Rule Election
|
S-9
|
|
Experts
|
S-9
|
|
Incorporation
of Certain Information by Reference
|
S-9
|
|
Where
You Can Find More Information
|
S-9
|
Prospectus Page
|
About
This Prospectus
|
3
|
|
Prospectus
Summary
|
3
|
|
Risk
Factors
|
6
|
|
Forward
Looking Statements
|
16
|
|
Presentation
of Financial Information
|
16
|
|
Incorporation
by Reference
|
16
|
|
Where
You Can Find More Information
|
17
|
|
Enforceability
of Civil Liabilities
|
18
|
|
Use
of Proceeds
|
18
|
|
Capitalization
and Indebtedness
|
19
|
|
Price
History
|
20
|
|
Share
Capital
|
21
|
|
Plan
of Distribution
|
23
|
|
Recent
Developments
|
24
|
|
Description
of Ordinary Shares
|
28
|
|
Description
of American Depositary Shares
|
32
|
|
Offering
Expenses
|
38
|
|
Financial
Statements
|
39
|
|
Experts
|
39
|
|
Legal
Matters
|
39
|
|
Disclosure
of Commission Position on Indemnification for Securities Act Liabilities
|
40
|
|
Report
of Independent Auditors
|
F-1
|
-i-
This
prospectus is in two parts. The first part is this prospectus supplement, which
describes the terms of this offering of our ordinary shares, and also adds
to
and updates information contained in or incorporated by reference into the
accompanying core prospectus. The second part is the accompanying core
prospectus, which gives more information about us and the ordinary shares we
may
offer from time to time under our shelf registration statement. To the extent
there is a conflict between the information contained, or referred to, in this
prospectus supplement, on the one hand, and the information contained, or
referred to, in the accompanying core prospectus or any document incorporated
by
reference therein, on the other hand, the information in this prospectus
supplement shall control.
We
have
not authorized any broker, dealer, salesperson or other person to give any
information or to make any representation other than those contained or
incorporated by reference in this prospectus supplement and the accompanying
core prospectus. You must not rely upon any information or representation not
contained or incorporated by reference in this prospectus supplement or the
accompanying core prospectus. This prospectus supplement and the accompanying
core prospectus do not constitute an offer to sell or the solicitation of an
offer to buy ordinary shares nor do this prospectus supplement and the
accompanying core prospectus constitute an offer to sell or the solicitation
of
an offer to buy ordinary shares in any jurisdiction to any person to whom it
is
unlawful to make such offer or solicitation in such jurisdiction. You should
not
assume that the information contained in this prospectus supplement and the
accompanying core prospectus is accurate on any date subsequent to the date
set
forth on the front of the document or that any information we have incorporated
by reference is correct on any date subsequent to the date of the document
incorporated by reference, even though this prospectus supplement and any
accompanying core prospectus is delivered or ordinary shares are sold on a
later
date.
It
is
important for you to read and consider all information contained in this
prospectus supplement and the accompanying core prospectus, including the
documents we have referenced in the section entitled “Incorporation of Certain
Information by Reference” in this prospectus supplement.
In
this
prospectus supplement and the accompanying core prospectus, “Amarin,” “Company,”
“we,” “us” and “our” refer to Amarin Corporation plc and its consolidated
subsidiaries. References to “U.S. dollars,” “USD” or “$” are to the lawful
currency of the United States and references to “pounds sterling,” “GBP£” or “£”
are to the lawful currency of the United Kingdom.
S-1
NOTE
REGARDING FORWARD-LOOKING STATEMENTS
This
prospectus supplement and the accompanying core prospectus include
forward-looking statements. These forward-looking statements relate, among
other
things, to our future capital needs, our ability to acquire or develop
additional marketable products, acceptance of our products by prescribers and
end-users, competitive factors, and our marketing and sales plans. In addition,
we may make forward-looking statements in future filings with the Securities
and
Exchange Commission (the “SEC”) and in written material, press releases and oral
statements issued by or on behalf of us. Forward-looking statements include
statements regarding our intent, belief or current expectations or those of
our
management regarding various matters, including statements that include
forward-looking terminology such as “may,” “will,” “should,” “believes,”
“expects,” “anticipates,” “estimates,” “continues,” or similar
expressions.
Forward-looking
statements are subject to risks and uncertainties, certain of which are beyond
our control. Actual results could differ materially from those anticipated
in
these forward-looking statements as a result of various factors, including
the
factors described in the Risk Factors section beginning on page 6 of the
accompanying core prospectus and in the Risk Factors section of this prospectus
supplement, our Annual Report on Form 20-F for the year ended
December 31, 2005 (which is incorporated by reference herein). Some, but
not all, of these factors are the timing of our future capital needs and our
ability to raise additional capital when needed, our ability to obtain
regulatory approval for our products, uncertainty of market acceptance of our
products, our ability to compete with other pharmaceutical companies, our
ability to develop or acquire new products, problems with important third-party
manufacturers on whom we rely, our ability to attract and retain key personnel,
and implementation and enforcement of government regulations. This list of
factors is not exclusive and other risks and uncertainties may cause actual
results to differ materially from those in forward-looking
statements.
All
forward-looking statements in this prospectus supplement and prospectus are
based on information available to us on the date hereof. We may not be required
to publicly update or revise any forward-looking statements that may be made
by
us or on our behalf, in this prospectus supplement and prospectus or otherwise,
whether as a result of new information, future events or other reasons. Because
of these risks and uncertainties, the forward-looking events and circumstances
discussed in this prospectus supplement and prospectus might not
transpire.
S-2
|
Ordinary
shares of 5p offered by us
|
2,387,850
shares
|
|
Ordinary
shares to be outstanding after
this
Offering
|
79,936,758
shares
|
|
Use
of proceeds
|
We
estimate that the net proceeds from this offering will be approximately
$4.1 million after deducting the fees and expenses of the
offering.
We
intend to use the net proceeds of this offering primarily for general
working capital, clinical trials, research and development expenses,
administrative expenses and for potential acquisitions of, or investments
in, complementary businesses, products and technologies. See “Use of
Proceeds” on page S-5.
|
|
Nasdaq
Capital Market Symbol
|
AMRN
|
The
information above and
elsewhere in this prospectus supplement regarding our outstanding ordinary
shares is based on 77,548,908
shares outstanding
as of
December 31, 2005 and excludes the following:
| · |
4,821,952
ordinary shares issuable upon the exercise of stock options outstanding
as
of December 31, 2005 at a weighted-average exercise price of $3.63
per
share;
|
| · |
500,000
ordinary shares issuable upon the exercise of warrants outstanding
as of
December 31, 2005 with an exercise price of $1.90 per share, 313,234
ordinary shares issuable upon the exercise of warrants outstanding
as of
December 31, 2005 with an exercise price of $3.48 per share and 9,135,034
ordinary shares issuable upon the exercise of warrants outstanding
as of
December 31, 2005 with an exercise price of $1.43 per share.
|
Amarin
Investment Holding Limited (AIHL), an entity controlled by our chairman
Mr. Thomas Lynch, has the right to subscribe for $528,798 of ordinary
shares, which represents more than 5% of the offering. In addition,
Mr.
Richard Stewart, a director and Chief Executive Officer of the Company, Mr.
Alan
Cooke, director and Chief Financial Officer of the Company and Messrs. John
Groom, Simon Kukes each of whom is a director of the Company, Sunninghill
Limited, an entity controlled by one of our non-executive directors, Dr. John
Climax, and Mr. Darren Cunningham, an executive officer of the Company, have
the
right to subscribe for shares in this offering. Mr. Kukes has the right to
subscribe for more than 5% of the offering. The subscriptions by AIHL and such
other directors and officers have been reviewed and approved by the independent
members of Amarin’s audit committee.
S-3
RISK
FACTORS
The
funds
generated from this equity offering may
not
end our need to find additional capital resources.
Prior
to
the completion of this offering the Company is forecast to have sufficient
cash
to fund its group operating activities into the fourth quarter of 2007. In
addition, we intend to obtain additional funding through earning license fees
from partnering our drug development pipeline and/or completing further
equity-based financings such as this offering. There is no assurance, however,
that this offering will eliminate the uncertainty as to whether we will be
able
to fund our operations on an ongoing basis. We will also require further capital
investment in the future to implement our long-term growth strategy of acquiring
additional development stage and/or marketable products, recruiting clinical,
regulatory and sales and marketing personnel, and growing our business. Our
ability to execute our business strategy and sustain our infrastructure at
our
current level will continue to be impacted by our ability to raise additional
capital and/or obtain additional funding. Depending on market conditions in
the
future and our ability to maintain financial stability, we may not have access
to additional capital on reasonable terms or at all. Any inability to obtain
additional financing when needed would have a material adverse effect on our
business and on our ability to operate our business on an ongoing
basis.
S-4
USE
OF PROCEEDS
We
estimate that the net proceeds from this offering will be approximately $4.1
million after deducting the fees and expenses of the offering.
We
will
retain broad discretion over the use of the net proceeds from the sale of our
ordinary shares offered hereby. We currently anticipate using the net proceeds
from this offering for:
| · |
general
working capital;
|
| · |
clinical
trials, research and development expenses;
|
| · |
selling,
general and administrative expenses; and
|
| · |
potential
acquisitions of, or investments in, complementary businesses, products
and
technologies.
|
Pending
the use of the net proceeds from this offering, we intend to invest the proceeds
in short-term, interest-bearing, money market deposit accounts.
S-5
CAPITALIZATION
AND INDEBTEDNESS
The
following table sets forth, on a UK GAAP basis, our capitalization and
indebtedness, as of December 31, 2005:
| · |
on
an actual basis; and
|
| · |
on
an as-adjusted basis to give effect to the sale of 2,387,850 shares
in
this offering after deducting the estimated offering expenses payable
by
us.
|
This
table should be read in conjunction with our consolidated financial statements
for the three years ended December 31, 2005 set forth in our Annual Report
on Form 20-F for the year ended December 31, 2005, together with our
quarterly earning releases and interim financial statements filed under Form
6-K
as incorporated herein.
As
at
December 31, 2005 Amarin Corporation plc held approximately $36.7 million
of cash and receivables balances.
|
Actual
$’000
|
As
Adjusted
|
||||||
|
Shareholders’
equity:
|
|||||||
|
Ordinary
share capital
|
6,778
|
6,985
|
|||||
|
Treasury
shares
|
(217
|
)
|
(217
|
)
|
|||
|
Capital
redemption reserve
|
27,633
|
27,633
|
|||||
|
Share
premium account
|
124,097
|
127,978
|
|||||
|
Profit
and loss account — (deficit)
|
(119,711
|
)
|
(119,711
|
)
|
|||
|
Total
shareholders’ equity
|
38,580
|
42,668
|
|||||
|
Total
capitalization
|
38,580
|
42,668
|
|||||
In
January 2006, Amarin entered into a definitive purchase agreement with Dr.
Tony
Ryan for a private equity placement, consisting of ordinary shares (“Shares”)
and warrants of Amarin Corporation, resulting in gross proceeds of $2.0 million.
In accordance with the terms of the investment, Amarin will sell 800,000 Shares
at $2.50 per Share and issue warrants to purchase 280,000 Shares at an exercise
price of $3.06 per Share. The above table does not reflect this
offering.
S-6
Under
UK
GAAP, the net tangible book value of our ordinary shares on
December 31, 2005 was $28.95 million, or approximately $0.37 per
share, based on 77,548,908 shares outstanding. Net tangible book value
represents the amount of our total tangible assets, less our total liabilities,
divided by the total number of our ordinary shares outstanding. Dilution in
net
tangible book value per ordinary share to new investors represents the
difference between the amount per share paid by investors in this offering
and
the net tangible book value per ordinary share immediately afterwards. Without
taking into account any other changes in net tangible book value after
December 31, 2005, other than to give effect to our receipt of the
estimated net proceeds from the sale of the shares issuable in this offering
at
an offering price of $1.75 per share, less estimated offering expenses, our
net
tangible book value as of December 31, 2005 after giving effect to the
proceeds described above would have been approximately $33.04 million or $0.41
per share. This represents an immediate increase in net tangible book value
of
$0.04 per share to existing stockholders and an immediate dilution in net
tangible book value of $1.34 per share to new investors.
The
following table illustrates this per share dilution:
|
Offering
price per share
|
$
|
1.75
|
|||||
|
Net
tangible book value per share as of December 31, 2005
|
$
|
0.37
|
|||||
|
Increase
per share attributable to new investors
|
$
|
0.04
|
|||||
|
As
adjusted net tangible book value per share after the
offering
|
$
|
0.41
|
|||||
|
Dilution
in net tangible book value per share to new investors
|
$
|
1.34
|
Pursuant
to stock purchase agreements entered into with each of the investors in the
May
24, 2005 offering, we have agreed that if by March 15, 2006 we have not
raised gross proceeds of at least $7,219,751 (representing $10 million
minus the amount by which the gross proceeds of the May 24, 2005 offering
exceeded $15 million) from one, or any combination of, the following
sources: (i) revenues from the licensing or partnering of our intellectual
property or proprietary information that are receivable prior to March 15,
2006; (ii) the issuance of ordinary shares at a price per ordinary share of
at least $2.50; and/or (iii) funds received by us in connection with the
exercise of outstanding warrants; then, at any time between March 15, 2006
and March 31, 2006, the investors in the May 24, 2005 offering shall have a
pro rata right to make an equity investment (the “Future Investment Right”), at
a price per ordinary share equal to the lesser of $1.75 or 84% of the volume
weighted average of closing prices of the ADRs on the Nasdaq Capital Market
over
the thirty trading days ending on March 15, 2006 (the “Purchase Price”), in
an amount of up to $7,219,751 less any sums received under such items (i),
(ii)
and (iii) (the “Future Financing Amount”).
As
of
March 15, 2006, the Future Financing Amount was equal to $4,178,738 and the
Purchase Price was determined to equal $1.75 per ordinary share. Based on the
Future Financing Amount and the Purchase Price determined in accordance with
the
Future Investment Right, 2,387,850 ordinary shares are being offered hereby
pursuant to the Future Investment Right.
To
the
extent that any such investor does not wish to take part in such subsequent
financing, the unallocated portion thereof will be allocated on a pro rata
basis
among those investors who have elected to fully participate in such financing
until the entire amount thereof has been allocated to investors that wish to
take part in the financing.
S-7
PLAN
OF DISTRIBUTION
The
ordinary shares will be sold at a pre-determined price of $1.75 per
share.
The
purchasers have no obligation to purchase ordinary shares offered
hereunder.
Unless
purchasers instruct us otherwise, we will deliver the ordinary shares being
issued to the investors to Citibank, N.A. London Branch, the custodian of our
ADR depositary bank, Citibank N.A., who will then cause ADRs to be issued to
purchasers in book entry form (unless instructed otherwise) upon our receipt
of
investor funds for the purchase of the ordinary shares offered pursuant to
this
prospectus and upon delivery of such ordinary shares to Citibank’s custodian. We
expect to deliver the ordinary shares being offered pursuant to this prospectus
as soon as practical after March 31, 2006.
No
placement fees shall be payable to any placement agent with respect to the
ordinary shares being offered pursuant to this prospectus.
Pursuant
to Rule 415 under the Securities Act of 1933, as amended (the “Securities Act”),
the maximum commission or discount to be received by any NASD member or
independent broker/dealer will not be greater than 8.0% for the sale of any
securities pursuant to this registration statement.
S-8
NASD
RULE ELECTION
Pursuant
to NASD Rule 4350(a)(1) for Foreign Private Issuers we have elected to follow
the home country practice of the United Kingdom in lieu of the requirements
of
NASD Rules 4350(i)(D) and 4350(i)(1)(A). Under NASD 4350(i)(D), issuers are
required to obtain shareholder approval prior to the issuance of common stock
at
a price less than the greater of book or market value which together with sales
by officers, directors or substantial shareholders of the company that equals
20% or more of the common stock or more of the voting power outstanding. Under
NASD 4350(i)(1)(A), issuers are required to obtain shareholder approval prior
to
when a stock option or purchase plan is established or materially amended or
other equity compensation arrangement is made pursuant to which stock may be
acquired by officers, directors, employees or consultants of the issuer, subject
to certain exceptions. No requirements similar to those described in the
preceding two sentences exist under the laws of the England and
Wales.
The
consolidated financial statements incorporated in this Prospectus by reference
to the Annual Report on Form 20-F for the year ended December 31, 2005 have
been
so incorporated in reliance on the report of PricewaterhouseCoopers LLP, an
independent registered public accounting firm , given on the authority of said
firm as experts in auditing and accounting.
The
SEC
allows us to incorporate by reference documents we file with the SEC, which
means that we can disclose information to you by referring you to those
documents. The information incorporated by reference is considered to be part
of
this prospectus, and certain later information that we file with the SEC will
automatically update and supersede this information. We incorporate by reference
our Annual Report on Form 20-F for the fiscal year ended December 31,
2005 and any amendments thereto.
All
annual reports on Form 20-F that we file with the SEC pursuant to the
Securities Exchange Act of 1934 after the date of this prospectus supplement
and
prior to the termination of the offering shall be deemed to be incorporated
by
reference into this prospectus and to be part hereof from the date of filing
of
such documents. We may incorporate by reference any Form 6-K subsequently
submitted to the SEC by identifying in such Form that it is being incorporated
by reference into this prospectus.
We
shall
undertake to provide without charge to each person to whom a copy of this
prospectus has been delivered, upon the written or oral request of any such
person to us, a copy of any or all of the documents referred to above that
have
been or may be incorporated into this prospectus by reference, including
exhibits to such documents, unless such exhibits are specifically incorporated
by reference to such documents. Requests for such copies should be directed
to
Amarin Corporation plc, 7 Curzon Street, London W1J 5HG, England,
Attention: Company Secretary, telephone +44-20-7499-9009.
You
should rely only on the information incorporated by reference or provided in
this prospectus supplement and the accompanying core prospectus. We have not
authorized anyone else to provide you with different information. This
prospectus is an offer to sell or to buy only the securities referred to in
this
prospectus, and only under circumstances and in jurisdictions where it is lawful
to do so. The information contained in this prospectus supplement and the core
prospectus is current only as of the date on the front page of those documents.
Also, you should not assume that there has been no change in our affairs since
the date of this prospectus supplement.
We
file
reports, including annual reports on Form 20-F, and other information with
the SEC pursuant to the rules and regulations of the SEC that apply to foreign
private issuers. You may read and copy any materials filed with the SEC at
its
Public Reference Room at 100 F Street, N.E., Washington, D.C. 20459. You may
obtain information on the operation of the Public Reference Room by calling
the
SEC at 1-800-SEC-0330. The registration
S-9
statement
of which this prospectus is a part, and other public filings with the SEC,
are
also available on the website maintained by the SEC at http://www.sec.gov.
We
provide Citibank N.A., as depositary under the deposit agreement between us,
the
depositary and registered holders of the American Depositary Receipts evidencing
ADSs, with annual reports, including a review of operations, and annual audited
consolidated financial statements prepared in conformity with generally accepted
accounting principles in the United Kingdom, or UK GAAP, together with a
reconciliation of net income and total stockholders equity to generally accepted
accounting principles in the United States, or US GAAP. Upon receipt of these
reports, the depositary is obligated to promptly mail them to all record holders
of ADSs. We also furnish to the depositary all notices of meetings of holders
of
ordinary shares and other reports and communications that are made generally
available to holders of ordinary shares. The depositary has undertaken in the
deposit agreement to mail to all holders of ADSs a notice containing the
information contained in any notice of a shareholders’ meeting received by the
depositary, or a summary of such information. The depositary has also undertaken
in the deposit agreement to make available to all holders of ADSs such notices
and all other reports and communications received by the depositary in the
same
manner as we make them available to holders of ordinary shares.
S-10
$50,000,000
AMARIN
CORPORATION PLC
Ordinary
Shares, directly or in the form of
American
Depositary Shares
We
will
provide the specific terms of the securities that we are offering, and the
manner in which they are being offered, in one or more supplements to this
prospectus. Any supplement may also add, update or change information contained
in this prospectus. You should read both this prospectus and any prospectus
supplement, together with the additional information described under the heading
“Incorporation of Certain Documents by Reference”, before investing in our
securities. The total dollar amount of securities covered by this prospectus
will not exceed $50,000,000.
Our
American Depositary Shares, evidenced by American Depositary Receipts, are
traded on the Nasdaq SmallCap Market, the principal trading market for our
securities, under the symbol “AMRN”. There is no public trading market for our
ordinary shares. On December 29, 2004, the closing sale price for our ADSs,
each representing one ordinary share, on the Nasdaq SmallCap Market was US$2.30
per ADS.
SEE
“RISK FACTORS” BEGINNING ON PAGE 6 TO READ ABOUT FACTORS YOU SHOULD CONSIDER
BEFORE BUYING THE SECURITIES.
We
cannot
sell any of these securities unless this prospectus is accompanied by a
prospectus supplement.
Neither
the Securities and Exchange Commission nor any state securities commission
has
approved or disapproved of these securities or determined if this prospectus
is
truthful or complete. Any representation to the contrary is a criminal
offense.
Amarin
Corporation plc
7
Curzon Street
London
W1J 5HG
England
+44
(0) 20 7499 9009
The
date
of this prospectus is March 1, 2005
TABLE
OF CONTENTS
|
About
This Prospectus
|
3
|
|
Prospectus
Summary
|
3
|
|
Risk
Factors
|
6
|
|
Forward
Looking Statements
|
17
|
|
Presentation
of Financial Information
|
17
|
|
Incorporation
by Reference
|
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Where
You Can Find More Information
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Enforceability
of Civil Liabilities
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Use
of Proceeds
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19
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Capitalization
and Indebtedness
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Price
History
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Share
Capital
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Plan
of Distribution
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Recent
Developments
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25
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Description
of Ordinary Shares
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Description
of American Depositary Shares
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Offering
Expenses
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Financial
Statements
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40
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Experts
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40
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Legal
Matters
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Disclosure
of Commission Position on Indemnification for Securities Act
Liabilities
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Report
of Independent Auditors
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F-1
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-i-
ABOUT
THIS PROSPECTUS
This
prospectus is part of a registration statement that we filed with the Securities
and Exchange Commission utilizing a “shelf” registration process. Under this
shelf process, we may sell any number of ordinary shares, directly or in the
form of American Depositary Shares, in one or more offerings up to a total
dollar amount of $50,000,000. The terms of the securities will be determined
at
the time of offering.
This
prospectus provides you with a general description of the securities we may
offer. Each time we sell securities, we will provide a prospectus supplement
that will contain specific information about the terms of that offering. The
prospectus supplement may also add to, update or change information contained
in
this prospectus and, accordingly, to the extent inconsistent, information in
this prospectus is superseded by the information in the prospectus supplement.
You should read both this prospectus and any prospectus supplement together
with
the additional information described under the heading “Where You Can Find More
Information.”
The
prospectus supplement to be attached to the front of this prospectus will
describe: the terms of the securities offered, the public offering price, the
price paid to us for the securities, the net proceeds to us and the other
specific terms related to the offering of these securities.
This
prospectus does not contain all of the information included in the registration
statement and the exhibits thereto. This prospectus includes statements that
summarize the contents of contracts and other documents that are filed as
exhibits to the registration statement. These statements do not necessarily
describe the full contents of such documents, and you should refer to those
documents for a complete description of these matters.
In
this
prospectus, “Amarin,” “Company,” “we,” “us” and “our” refer to Amarin
Corporation plc and its consolidated subsidiaries. References to “U.S. dollars,”
“USD” or “$” are to the lawful currency of the United States and references to
“pounds sterling,” “GBP£” or “£” are to the lawful currency of the United
Kingdom.
This
prospectus summary highlights selected information contained elsewhere in this
prospectus and the documents incorporated by reference. You should read the
following summary together with the more detailed information regarding our
Company and the shares being sold in this offering, which information appears
elsewhere in this prospectus and in selected portions of our Annual Report
on
Form 20-F for the year ended December 31, 2003, and other documents
filed with the SEC that we have incorporated by reference into this
prospectus.
Our
Business
Amarin
Corporation plc is a neuroscience company focused on the development and
commercialization of novel drugs for the treatment of central nervous system
disorders. Amarin’s immediate focus is on the continued development of Miraxion™
in the U.S., currently in phase III development for Huntington’s disease.
Miraxion (formerly known as LAX-101) is a proprietary treatment within a defined
field of use including Huntington’s disease and other central nervous system
disorders including treatment unresponsive depression. We have recently
consummated the acquisition of the entire issued share capital of Laxdale
Limited (now known as Amarin Neuroscience Limited) which owns the rights to,
and
previously conducted the development of, Miraxion. Prior to such acquisition,
we
had entered into a license agreement with Laxdale giving us exclusive U.S.
rights to market and distribute Miraxion. As a result of the Laxdale
acquisition, we now have full rights to Miraxion in the United States, Canada,
Japan and the European Union and for all central nervous system indications
including Huntington’s disease and treatment-unresponsive depression. In
addition
the
acquisition provides us with other compounds in earlier stages of development
and a neuroscience research and development capability.
We
intend
to concentrate on developing our late-stage development pipeline, initially
focusing on Huntington’s disease and treatment-unresponsive depression. We
intend to directly commercialize our neurology products in the U.S. and
out-license or partner our product rights in Europe and Japan. We also intend
to
out-license or partner our pipeline globally for indications outside neurology,
including treatment-unresponsive depression.
Amarin
therefore anticipates that future revenues will comprise (i) direct product
sales in the U.S. from self-marketed neurology products and (ii) milestones
and royalty income from its development and marketing partners for markets
outside the U.S. and for indications other than in the field of neurology.
Amarin also intends to leverage its development capabilities by supplementing
its internal development pipeline through acquiring and/or in-licensing
products.
Our
principal executive offices are located at 7 Curzon Street, London W1J 5HG,
England. Our telephone number is +44-20-7499-9009.
Miraxion
for Huntington’s disease
Huntington’s
disease is a genetic neurodegenerative disease characterized by movement
disorder, dementia and psychiatric disturbance. It has been diagnosed in
approximately 30,000 patients in the U.S. and a similar number in Europe.
Additionally, over 200,000 people in the U.S. alone are genetically “at risk” of
developing the disease. Onset of symptoms is typically between 30-50 years
of age with a typical life expectancy from diagnosis of 10-25 years.
Patients with late stage disease require continuous nursing care, often in
nursing homes, with an estimated annual cost to the U.S. economy of up to
$2.5 billion. Presently, there is no effective treatment or cure. The
potential Huntington’s disease market in North America and Europe is estimated
to be greater than $500 million per year in total.
Following
positive results in phase II studies for Miraxion, Laxdale began a 135 patient
phase III double-blind placebo-controlled study in 2001. Statistical
significance was not achieved in the entire patient population in this study,
primarily due to the high number of patients who did not comply with the
protocol. However, in those patients that complied with the protocol (“per
protocol”), a trend to statistical significance was observed. Additionally,
further analysis of the clinical data from the phase III study also identified
a
group of Huntington’s patients that responded to Miraxion with statistical
significance. Statistically significant improvement was found in patients whose
cytosine, adenosine and guanine (CAG) repeat length was less than 45.
Huntington’s disease is believed to be caused by a genetic mutation of the CAG
repeat. It is believed that there is a direct link between CAG repeat length
and
age of onset, disease progression and the clinical symptoms of Huntington’s
disease. CAG repeat length can be measured by a genetic blood test. It is
estimated that patients with a CAG repeat length of less than 45 represent
over
65% of all Huntington’s disease patients. We plan to conduct further phase III
studies for Miraxion, utilizing the information obtained from the initial phase
III trial, the per protocol analysis, the specific CAG repeat length analysis,
recent discussions with the FDA and feedback from the European Medicines
Evaluation Agency (“EMEA”) to assist in designing the protocol for such studies.
It is anticipated that the studies will start in the first half of 2005, subject
to finalization of the protocol. Miraxion was submitted for regulatory approval
in Europe in June 2003 based on the initial phase III clinical data.
Because this was a final submission, we were not able to incorporate the results
of any further Phase III studies into this European application and therefore,
as reported in our Report on Form 6-K dated February 17, 2005, the
Company voluntarily withdrew its application, but will be able to reapply for
approval on the basis of the two phase III studies planned to begin in the
first
half of 2005 should the need arise.
Miraxion
has been granted fast track designation by the FDA for Huntington’s disease and
has received orphan drug designation in the U.S. and Europe for this indication.
Fast track status generally
-4-
represents
the FDA’s commitment to provide a six-month review period for a filed New Drug
Application (NDA), which is faster than the typical review period for most
non-fast track drugs. Fast track status does not however guarantee a specific
review time or a pre-determined outcome. Orphan drugs are those that treat
rare
diseases or conditions, and if approved receive marketing exclusivity of seven
years in the U.S. and up to ten years in Europe. However, orphan drug
exclusivity does not bar competitors from developing other active molecules.
In
addition, the same molecule can be separately developed and approved within
such
special exclusivity period for the same indication if shown to be clinically
superior or under other circumstances. Orphan drug status does not confer patent
rights upon the holder, nor does it provide an exemption from claims of
infringement of patents which may be held by third parties.
Miraxion
for treatment unresponsive depression
Clinical
depression is one of the most common mental illnesses, affecting more than
19 million people in the U.S. alone each year. In 2003, U.S. sales of
antidepressants were approximately $12 billion. However, about one third of
patients with depression still fail to respond to standard drugs and another
third show only partial response. Miraxion is being developed as an adjunctive
therapy to treat those who do not respond to current treatments.
A
number
of phase II clinical trials have been conducted with Miraxion in
treatment-unresponsive depression that concluded with statistical significance
that a 1-gram per day dose of Miraxion was effective in treating depression
in
patients who remained depressed despite receiving standard therapy. The results
of two of these trials were published in the Archives of General Psychiatry
in
October 2002 and the American Journal of Psychiatry in
March 2002.
As
a
result of these encouraging clinical trial results, Amarin intends to further
evaluate the clinical benefits of Miraxion in this indication and will seek
a
development and marketing partner to accelerate this program.
Amarin’s
short-term objectives
| · |
To
commence phase III studies with Miraxion in Huntington’s Disease in the
first half of 2005
|
| · |
To
commence late-stage clinical studies in 2005 in another indication
with a
product either from Amarin’s internal pipeline or from in-licensing or
acquisition activities.
|
-5-
RISK
FACTORS
You
should carefully consider the risks and the information about our business
described below, together with all of the other information included in this
prospectus, before buying shares in this offering. You should not interpret
the
order in which these considerations are presented as an indication of their
relative importance to you.
We
have a history of losses, and we may continue to generate losses in the
foreseeable future.
We
have
not been profitable in any of the last three fiscal years. For the fiscal years
ended December 31, 2001, 2002 and 2003, we reported losses of approximately
$5.3 million, $37.0 million and $20.9 million respectively under
UK GAAP. Unless and until marketing approval is obtained from the U.S. Food
and
Drug Administration (FDA) for our principal product, Miraxion, or we are
otherwise able to acquire rights to products that have received regulatory
approval or are at an advanced stage of development and can be readily
commercialized, we may not be able to generate revenues in future periods and
we
may not be able to return to profitability.
In
February 2004, we divested a majority of our assets. Although we acquired
Laxdale Limited and its Stirling, Scotland facility on October 8, 2004, we
continue to have limited operations, assets and financial resources. As a
result, we currently have no marketable products or other source of revenues.
All of our current products including Miraxion, our principal product, are
in
the development stage. The development of pharmaceutical products is a capital
intensive business. Therefore, we expect to incur expenses without corresponding
revenues at least until we are able to obtain regulatory approval and sell
our
future products in significant quantities. This may result in net operating
losses, which will increase continuously until we can generate an acceptable
level of revenues, which we may not ever attain. Further, even if we do achieve
operating revenues, there can be no assurance that such revenues will be
sufficient to fund continuing operations. Therefore we cannot predict whether
we
will ever be able to achieve profitability.
Although
we intend to acquire rights to additional products, which we anticipate may
either be in the development stage or approved products, we may not ever be
successful in doing so. There is also a risk that Miraxion or any other
development stage products we may acquire will not be approved by the FDA or
regulatory authorities in other countries on a timely basis or at all. The
inability to obtain such approvals would adversely affect our ability to
generate revenues.
The
likelihood of success of our business plan must be considered in light of the
problems, expenses, difficulties, complications and delays frequently
encountered in connection with developing and expanding early stage businesses
and the competitive environment in which we operate.
Our
historical financial results do not form an accurate basis for assessing our
current business.
As
a
consequence of the divestiture of a majority of our business and assets during
2003 and early 2004, our financial results for 2003 and prior periods do not
form an accurate basis upon which investors should base an assessment of our
business and prospects. Prior to such divestiture, our revenues were generated
primarily from the sale of marketable products in the U.S, the out-licensing
of
our proprietary technologies, and research and development work performed on
a
contract basis. All of these lines of business have been sold, and our current
focus is on development efforts for Miraxion and targeting new products for
potential acquisition. Accordingly, our historical financial results reflect
a
substantially different business from that currently being
conducted.
We
may have to issue additional equity leading to shareholder
dilution.
We
are
committed to issue equity to the former shareholders of Laxdale upon the
successful achievement of specified milestones for the Miraxion development
program (subject to such
-6-
shareholders’
right to choose cash payment in lieu of equity). See “Recent
Developments—Laxdale Acquisition.” We have also issued warrants to purchase
500,000 ordinary shares, which were originally acquired by Elan Corporation
plc
as part of a debt re-negotiation and were subsequently sold by Elan to Amarin
Investment Holding Limited, an entity controlled by Thomas G. Lynch, our
Chairman. Additionally, in pursuing our growth strategy it is probable that
we
will either need to issue new equity as consideration for the acquisition of
products, or to raise new finance in which case new equity or convertible equity
or debt instruments may be issued to new or existing shareholders. The creation
of new shares would lead to dilution of the current shareholder
base.
If
we cannot find additional capital resources, we will have difficulty in
operating as a going concern and growing our business.
As
of
December 8, 2004 and on the basis of forecast cash flows, we have
sufficient cash to fund the group’s operating activities, including the planned
phase III trials for Miraxion in Huntington’s disease, through the summer of
2005. We intend to obtain additional funding through earning license fees from
partnering our drug development pipeline and/or completing further equity-based
financings in the forthcoming year. There is no assurance however that our
efforts to raise additional funding will be successful. If efforts are
unsuccessful, there is uncertainty as to whether we will be able to fund our
operations on an ongoing basis. We may also require further capital investment
in the future to implement our long-term growth strategy of acquiring additional
development stage and/or marketable products, recruiting clinical, regulatory
and sales and marketing personnel, and growing our business. Depending on market
conditions and our ability to maintain financial stability, we may not have
access to additional capital on reasonable terms or at all. Any inability to
obtain additional financing when needed would adversely affect our ability
to
sustain and to grow our business.
We
will be dependent upon the success of a limited range of
products.
At
present we are substantially reliant upon the success of our principal product,
Miraxion. If development efforts for this product are not successful, or if
adequate demand for this product is not generated should FDA approval be
obtained, our business will be materially and adversely affected. Although
we
intend to acquire additional products, even if we are successful in doing so
the
range of products we will be able to commercialize may be limited, given our
financial resources. This could restrict our ability to respond to adverse
business conditions. If we are not successful in developing Miraxion or any
future product, or if there is not adequate demand for any such product or
the
market for such product develops less rapidly than we anticipate, we may not
have the capability to shift our resources to the development of alternative
products. As a result, the limited range of products we intend to develop could
constrain our ability to generate revenues and achieve
profitability.
Our
ability to generate revenues depends on obtaining regulatory approvals for
Miraxion.
Miraxion,
which is in Phase III development for Huntington’s disease and Phase II
development for treatment-unresponsive depression, is currently our only product
in late-stage development. In order to successfully commercialize Miraxion,
we
will be required to conduct all tests and clinical trials needed in order to
meet regulatory requirements, to obtain applicable regulatory approvals, and
to
prosecute patent applications. The costs of developing and obtaining regulatory
approvals for pharmaceutical products can be substantial. It is our intent
to
conduct a further Phase III program to support a possible new drug application
or “NDA” for Miraxion for the treatment of Huntington’s disease. This decision
is consistent with the approval process of new drug products for neurological
diseases, and reflects the fact that statistical significance was not achieved
in the entire study patient population in the first Phase III study. Our ability
to commercialize Miraxion for this indication is dependent upon the success
of
these development efforts. If such clinical trials fail to produce satisfactory
results, or if we are unable to maintain the financial and operational
capability to complete
-7-
these
development efforts, we may not ever be able to generate revenues from Miraxion.
Even if we obtain regulatory approvals, the timing or scope of any approvals
may
prohibit or reduce our ability to commercialize Miraxion successfully. For
example, if the approval process takes too long we may miss market opportunities
and give other companies the ability to develop competing products.
Additionally, the terms of any approvals may not have the scope or breadth
needed for us to commercialize successfully Miraxion.
We
may not be successful in developing or marketing future products if we cannot
meet extensive regulatory requirements for quality, safety and efficacy
promulgated by the FDA and other regulatory agencies.
Our
long-term strategy involves the development of products we may acquire from
third parties. The success of these efforts is dependent in part upon the
ability of the products to meet and to continue to meet regulatory requirements
in the jurisdictions where we ultimately intend to sell such products. The
development, manufacture and marketing of pharmaceutical products are subject
to
extensive regulation by governmental authorities in the U.S., the European
Union, Japan and elsewhere. In the U.S., the FDA generally requires pre-clinical
testing and clinical trials of each drug to establish its safety and efficacy
and extensive pharmaceutical development to ensure its quality before its
introduction into the market. Regulatory authorities in other jurisdictions
impose similar requirements. The process of obtaining regulatory approvals
is
lengthy and expensive and the issuance of such approvals is uncertain. The
commencement and rate of completion of clinical trials may be delayed by many
factors, including:
| · |
the
inability to manufacture sufficient quantities of qualified materials
under current manufacturing practices for use in clinical
trials;
|
| · |
slower
than expected rates of patient recruitment;
|
| · |
the
inability to observe patients adequately after treatment;
|
| · |
changes
in regulatory requirements for clinical trials;
|
| · |
the
lack of effectiveness during clinical trials;
|
| · |
unforeseen
safety issues;
|
| · |
delays,
suspension, or termination of a trial due to the institutional review
board responsible for overseeing the study at a particular study
site;
and
|
| · |
government
or regulatory delays or “clinical holds” requiring suspension or
termination of a trial.
|
Even
if
we obtain positive results from early stage pre-clinical or clinical trials,
we
may not achieve the same success in future trials. Clinical trials may not
demonstrate statistically sufficient safety and effectiveness to obtain the
requisite regulatory approvals for product candidates. The failure of clinical
trials to demonstrate safety and effectiveness for our desired indications
could
harm the development of that product candidate as well as other product
candidates, and our business and results of operations would
suffer.
Any
approvals that are obtained may be limited in scope, or may be accompanied
by
burdensome post-approval study or other requirements. This could adversely
affect our ability to receive future royalty payments from the sale of such
products. Even in circumstances where products are approved by a regulatory
body
for sale, the regulatory or legal requirements may change over time, or new
safety or efficacy information may be identified concerning a product, which
may
lead to the withdrawal of a product from the market. Additionally, even after
approval, a marketed drug and its manufacturer are subject to continual review.
The discovery of previously unknown problems with a product or
-8-
manufacturer
may result in restrictions on such product or manufacturer, including withdrawal
of the product from the market, which would have a negative impact on our
potential revenue stream.
After
approval, our products will be subject to extensive government
regulation.
Once
a
product is approved, numerous post-approval requirements apply. Among other
things, the holder of an approved NDA or other license is subject to periodic
and other monitoring and reporting obligations of the FDA and other regulatory
bodies, including obligations to monitor and report adverse events and instances
of the failure of a product to meet the specifications in the approved
application. Application holders must also submit advertising and other
promotional material to regulatory authorities and report on ongoing clinical
trials.
Advertising
and promotional materials must comply with FDA rules in addition to other
potentially applicable federal and local laws in the U.S. and in other
countries. In the U.S., the distribution of product samples to physicians must
comply with the requirements of the U.S. Prescription Drug Marketing Act.
Manufacturing facilities remain subject to FDA inspection and must continue
to
adhere to the FDA’s current good manufacturing practice requirements.
Application holders must obtain FDA approval for product and manufacturing
changes, depending on the nature of the change. Sales, marketing, and
scientific/educational grant programs must comply with the U.S.
Medicare-Medicaid Anti-Fraud and Abuse Act, as amended, the U.S. False Claims
Act, as amended, and similar state laws. Pricing and rebate programs must comply
with the U.S. Medicaid rebate requirements of the Omnibus Budget Reconciliation
Act of 1990, as amended. If products are made available to authorized users
of
the U.S. Federal Supply Schedule of the General Services Administration,
additional laws and requirements apply. All of these activities are also
potentially subject to U.S. federal and state consumer protection and unfair
competition laws. Similar requirements exist in all of these areas in other
countries.
Depending
on the circumstances, failure to meet these post-approval requirements can
result in criminal prosecution, fines or other penalties, injunctions, recall
or
seizure of products, total or partial suspension of production, denial or
withdrawal of pre-marketing product approvals, or refusal to allow us to enter
into supply contracts, including government contracts. In addition, even if
we
comply with FDA and other requirements, new information regarding the safety
or
effectiveness of a product could lead the FDA to modify or withdraw a product
approval.
Adverse
regulatory action, whether pre- or post-approval, can potentially lead to
product liability claims and increase our product liability
exposure.
Our
future products may not be able to compete effectively against those of our
competitors.
Competition
in the pharmaceutical industry is intense and is expected to increase. If we
are
successful in completing the development of Miraxion, we may face competition
to
the extent other pharmaceutical companies are able to develop products for
the
treatment of Huntington’s disease. Potential competitors in this market may
include companies with greater resources and name recognition than us.
Furthermore, to the extent we are able to acquire or develop additional
marketable products in the future, such products will compete with a variety
of
other products within the U.S., possibly including established drugs and major
brand names. Competitive factors, including generic competition, could force
us
to lower prices or could result in reduced sales. In addition, new products
developed by others could emerge as competitors to our future products. Products
based on new technologies or new drugs could render our products obsolete or
uneconomical.
Our
potential competitors both in the U.S. and Europe may include large,
well-established pharmaceutical companies, specialty pharmaceutical sales and
marketing companies, and specialized neurology companies. In addition, we may
compete with universities and other institutions involved in the development
of
technologies and products that may be competitive with ours. Many of
our
-9-
competitors
will likely have greater resources than us, including financial, product
development, marketing, personnel and other resources. Should a competitive
product obtain marketing approval prior to Miraxion, this would significantly
erode the projected revenue streams and anticipated first-to-market advantage
for such product.
The
success of our future products will also depend in large part on the willingness
of physicians to prescribe these products to their patients. Our future products
may compete against products that have achieved broad recognition and acceptance
among medical professionals. In order to achieve an acceptable level of
subscriptions for our future products, we must be able to meet the needs of
both
the medical community and end users with respect to cost, efficacy and other
factors.
Our
supply of future products could be dependent upon relationships with
manufacturers and key suppliers.
We
have
no in-house manufacturing capacity and, to the extent we are successful in
completing the development of Miraxion and/or acquiring or developing marketable
products in the future, we will be obliged to rely upon contract manufacturers
to produce our products. We may not be able to enter into manufacturing
arrangements on terms that are favorable to us. Moreover, if any future
manufacturers should cease doing business with us or experience delays,
shortages of supply or excessive demands on their capacity, we may not be able
to obtain adequate quantities of product in a timely manner, or at all.
Manufacturers are required to comply with current Good Manufacturing Practices
regulations promulgated by the FDA. The failure by a future manufacturer to
comply with these regulations could affect its ability to provide us with
product. Any manufacturing problem or the loss of a contract manufacturer could
be disruptive to our operations and result in lost sales.
Additionally,
we will be reliant on third parties to supply the raw materials needed to
manufacture Miraxion and other potential products. Any reliance on suppliers
may
involve several risks, including a potential inability to obtain critical
materials and reduced control over production costs, delivery schedules,
reliability and quality. Any unanticipated disruption to future contract
manufacture caused by problems at suppliers could delay shipment of products,
increase our cost of goods sold and result in lost sales.
We
may not be able to grow our business unless we can acquire and market or
in-license new products.
We
are
pursuing a strategy of product acquisitions and in-licensing in order to
generate growth. Although we intend to engage in proprietary research and
development of new compounds, our capability to conduct these activities is
limited. We must therefore rely on our ability to identify other companies
that
are willing to sell or license product lines to us. We will be competing for
these products with other parties, many of whom have substantially greater
financial, marketing and sales resources. Even if suitable products are
available, depending on competitive conditions we may not be able to acquire
rights to additional products on acceptable terms, or at all. Our inability
to
acquire additional products or successfully introduce new products could have
a
material adverse effect on our business.
In
order to commercialize our future products, we will need to establish a sales
and marketing capability.
At
present we do not have any sales or marketing capability, since all of our
products are currently in the development stage. However if we are successful
in
obtaining regulatory approval for Miraxion, we intend to directly commercialize
this product in the U.S. market. Similarly, to the extent we execute our long
term strategy of expanding our portfolio by developing or acquiring additional
marketable products, we intend to directly sell our neurology products in the
U.S. In order to market Miraxion and
-10-
any
other
new products, we will need to add marketing and sales personnel who have
expertise in the pharmaceuticals business. We must also develop the necessary
supporting distribution channels. Although we believe we can build the required
infrastructure, we may not be successful in doing so if we cannot attract
personnel or generate sufficient capital to fund these efforts. Failure to
establish a sales force and distribution network in the United States would
have
a material adverse effect on our ability to grow our business.
The
planned expansion of our business may strain our
resources.
Our
strategy for growth includes potential acquisitions of new products for
development and the introduction of these products to the market. Since we
currently operate with limited resources, the addition of such new products
could require a significant expansion of our operations, including the
recruitment, hiring and training of additional personnel, particularly those
with a clinical or regulatory background. Any failure to recruit necessary
personnel could have a material adverse effect on our business. Additionally,
the expansion of our operations and work force could create a strain on our
financial and management resources.
We
may incur potential liabilities relating to discontinued operations or
products.
In
October 2003 we sold Gacell Holdings AB, the Swedish holding company of
Amarin Development AB (ADAB), our Swedish drug development subsidiary, to Watson
Pharmaceuticals, Inc. In February 2004 we sold our U.S. subsidiary,
Amarin Pharmaceuticals Inc., and certain assets to Valeant Pharmaceuticals
International. In connection with these transactions, we provided a number
of
representations and warranties to Valeant and Watson regarding the respective
businesses sold to them, and other matters, and we undertook to indemnify
Valeant and Watson under certain circumstances for breaches of such
representations and warranties. We are not aware of any circumstances which
could reasonably be expected to give rise to an indemnification obligation
under
our agreements with either Valeant or Watson. However, we cannot predict whether
matters may arise in the future which were not known to us and which, under
the
terms of the relevant agreements, could give rise to a claim against
us.
We
will be dependent on patents, proprietary rights and
confidentiality.
Because
of the significant time and expense involved in developing new products and
obtaining regulatory approvals, it is very important to obtain patent and trade
secret protection for new technologies, products and processes. Our ability
to
successfully implement our business plan will depend in large part on our
ability to:
| · |
acquire
patented or patentable products and technologies;
|
| · |
obtain
and maintain patent protection for our current and acquired
products;
|
| · |
preserve
any trade secrets relating to our current and future products;
and
|
| · |
operate
without infringing the proprietary rights of third
parties.
|
Although
we intend to make reasonable efforts to protect our current and any future
intellectual property rights and to ensure that any proprietary technology
we
acquire does not infringe the rights of other parties, we may not be able to
ascertain the existence of all potentially conflicting claims. Therefore, there
is a risk that third parties may make claims of infringement against our current
or future products or technologies. In addition, third parties may be able
to
obtain patents that prevent the sale of our current or future products or
require us to obtain a license and pay significant fees or royalties in order
to
continue selling such products.
-11-
We
anticipate that competitors may from time to time oppose our efforts to obtain
patent protection for new technologies or to submit patented technologies for
regulatory approvals. Competitors may seek to challenge patent applications
or
existing patents to delay the approval process, even if the challenge has little
or no merit. Patent challenges are generally highly technical, time consuming
and expensive to pursue. Were we to be subject to one or more patent challenges,
that effort could consume substantial time and resources, with no assurances
of
success, even when holding an issued patent.
The
loss of any key management or qualified personnel could disrupt our
business.
We
are
highly dependent upon the efforts of our senior management. The loss of the
services of one or more members of senior management could have a material
adverse effect on us. As a small company with a streamlined management
structure, the departure of any key person could have a significant impact
and
would be potentially disruptive to our business. Furthermore, because of the
specialized nature of our business, as our business plan progresses we will
be
highly dependent upon our ability to attract and retain qualified scientific,
technical and key management personnel. There is intense competition for
qualified personnel in the areas of our activities. In this environment we
may
not be able to attract and retain the personnel necessary for the development
of
our business, particularly if we do not achieve profitability. The failure
to
recruit key scientific and technical personnel would be detrimental to our
ability to implement our business plan.
We
have
entered into an employment agreement with our chief executive officer. The
term
of this agreement continues in full force and effect, subject to each party’s
right to terminate upon twelve months’ notice. Our officers and key employees,
other than our chief executive officer, are not employed for any specified
period and are not restricted from seeking employment elsewhere, subject only
to
giving appropriate notice to us.
We
are subject to continuing potential product liability.
Although
we disposed of the majority of our former products during 2003 and 2004, we
remain subject to the potential risk of product liability claims relating to
the
manufacturing and marketing of our former products during the period prior
to
their divestiture. Any person who is injured as a result of using one of our
former products during our period of ownership may have a product liability
claim against us without having to prove that we were at fault. The potential
for liability exists despite the fact that our former subsidiary, Amarin
Pharmaceuticals Inc. (API), conducted all sales and marketing activities
with respect to such product. Although we have not retained any liabilities
of
API in this regard, as the prior holder of ownership rights to such former
products we could be subject to potential claims on a theory of strict
liability. Since we distributed and sold our products to a wide number of end
users, the risk of such claims could be material. Product liability claims
could
also be brought by persons who took part in clinical trials involving our former
development stage products. A successful claim brought against us could have
a
material adverse effect on our business. We do not at present carry product
liability insurance to cover any such risks.
If
we
were to seek insurance coverage, we may not be able to maintain product
liability coverage on acceptable terms if our claims experience results in
high
rates, or if product liability insurance otherwise becomes costlier or
unavailable because of general economic, market or industry
conditions.
-12-
The
price of our ADSs may be volatile.
The
stock
market has from time to time experienced significant price and volume
fluctuations that may be unrelated to the operating performance of particular
companies. In addition, the market prices of the securities of many
pharmaceutical and medical technology companies have been especially volatile
in
the past, and this trend is expected to continue in the future. Our ADSs may
also be subject to volatility as a result of their limited trading market.
We
currently have approximately 37.1 million ADSs outstanding, creating a risk
that there may not be sufficient liquidity in the market to accommodate
significant increases in selling activity or the sale of a large block of
securities. The outstanding ADS amount includes approximately 10 million ADSs
currently subject to lockup agreements, including 7,371,210 ADSs held by Amarin
Investment Holding Limited (an entity controlled by our Chairman, Mr. Thomas
G.
Lynch) which are subject to a lockup agreement pursuant to which they may not
be
sold for a period of six months from October 8, 2004. This will further
restrict liquidity in the short term. Pursuant to a registration statement
which
became effective in January 2005, we registered 25,747,024 additional ordinary
shares, of which 6,054,688 are contingent shares issuable only upon the
occurrence of certain milestones, and the balance of approximately
19.7 million shares are currently issued and outstanding. Of these
19.7 million shares, approximately 14.4 million are eligible for sale
and the balance of approximately 5.3 million are subject to restrictions on
transfer pursuant to lockup agreements. Specifically 2,717,391 shares recently
issued to Amarin Investment Holding Limited (which shares are included in the
7,371,210 ADSs held by it as discussed above) may not be sold for a period
of
six months from October 8, 2004, and 2,572,000 shares issued to Belsay
Limited (in connection with the acquisition of Laxdale) can only be sold within
certain limitations for a period of up to 360 days from October 8,
2004. For further details regarding the limitations applicable to Belsay see
“Recent Developments—Laxdale Acquisition.” Accordingly, the trading market for
our ADSs may remain illiquid until such lockup periods expire. In addition,
our
ADSs have historically had limited trading volume, which may also result in
volatility. During the twelve-month period from February 26, 2004 through
February 25, 2005, the average daily trading volume for our ADSs has been
approximately 77,314 shares. During the period from October 8, 2004 (being
the date that we closed the Laxdale acquisition) through February 25, 2005,
however, the average daily trading volume for our ADSs has been approximately
120,352 shares. Nevertheless, if our public float and the level of trading
remain at limited levels over the long term, this could result in volatility
and
increase the risk that the market price of our ADSs may be affected by factors
such as:
| · |
the
announcement of new products or technologies;
|
| · |
innovation
by us or our future competitors;
|
| · |
developments
or disputes concerning any future patent or proprietary
rights;
|
| · |
actual
or potential medical results relating to our products or our competitors’
products;
|
| · |
interim
failures or setbacks in product development;
|
| · |
regulatory
developments in the U.S., the European Union or other
countries;
|
| · |
currency
exchange rate fluctuations; and
|
| · |
period-to-period
variations in our results of
operations.
|
-13-
The
rights of our shareholders may differ from the rights typically afforded to
shareholders of a U.S. corporation.
We
are
incorporated under English law. The rights of holders of Ordinary Shares and,
therefore, certain of the rights of holders of ADSs, are governed by English
law, including the Companies Act 1985, (as amended), and by our memorandum
and
articles of association. These rights differ in certain respects from the rights
of shareholders in typical U.S. corporations. See “Description of Ordinary
Shares.” The principal differences include the following:
| · |
Under
English law, each shareholder present at a meeting has only one vote
unless a valid demand is made for a vote on a poll, in which each
holder
gets one vote per share owned. Under U.S. law, each shareholder typically
is entitled to one vote per share at all meetings. Under English
law, it
is only on a poll that the number of shares determines the number
of votes
a holder may cast. You should be aware, however, that the voting
rights of
ADSs are also governed by the provisions of a deposit agreement with
our
depositary bank. See “Description of American Depositary Shares—Voting
Rights.”
|
| · |
Under
English law, each shareholder generally has pre-emptive rights to
subscribe on a proportionate basis to any issuance of shares. Under
U.S.
law shareholders generally do not have pre-emptive rights unless
specifically granted in the certificate of incorporation or otherwise.
See
“Description of Ordinary Shares—Pre-emptive Rights.”
|
| · |
Under
English law, certain matters require the approval of 75% of the
shareholders, including amendments to the memorandum and articles
of
association. This may make it more difficult for us to complete corporate
transactions deemed advisable by the board of directors. Under U.S.
law,
generally only majority shareholder approval is required to amend
the
certificate of incorporation or to approve other significant transactions.
See “Description of Ordinary Shares—Voting Rights.”
|
| · |
Under
English law, shareholders may be required to disclose information
regarding their equity interests upon our request, and the failure
to
provide the required information could result in the loss or restriction
of rights attaching to the shares including prohibitions on the transfer
of the shares as well as restrictions on dividends and other payments.
Comparable provisions generally do not exist under U.S. law. See
“Description of Ordinary Shares—Disclosure of Interests.”
|
| · |
The
quorum requirements for a shareholders’ meeting is a minimum of two
persons present in person or by proxy. Under U.S. law, a majority
of the
shares eligible to vote must generally be present (in person or by
proxy)
at a shareholders’ meeting in order to constitute a quorum. The minimum
number of shares required for a quorum can be reduced pursuant to
a
provision in a company’s certificate of incorporation or bylaws, but
typically not below one-third of the shares entitled to vote at the
meeting.
|
U.S.
shareholders may not be able to enforce civil liabilities against
us.
A
number
of our directors and executive officers are non-residents of the U.S., and
all
or a substantial portion of the assets of such persons are located outside
the
U.S. As a result, it may not be possible for investors to effect service of
process within the U.S. upon such persons or to enforce against them judgments
obtained in U.S. courts predicated upon the civil liability provisions of the
federal securities laws of the U.S. We have been advised by our English
solicitors that there is doubt as to the enforceability in England in original
actions, or in actions for enforcement of judgments of U.S. courts, of civil
liabilities to the extent predicated upon the federal securities laws of the
U.S.
-14-
Foreign
currency fluctuations may affect our future financial results or cause us to
incur losses.
We
record
our transactions and prepare our financial statements in U.S. dollars. See
Item
3A of our Annual Report on Form 20-F for the year ended December 31,
2003—“Selected Financial Data—General—Exchange Rates.” Since our strategy
involves the development of products for the U.S. market, we anticipate that
the
majority of our revenues and expenditures will be denominated in U.S. dollars.
However, certain of our costs are denominated in pounds sterling and in euro
as
a result of our having operations based in the United Kingdom and the European
Union. As a consequence, the results reported in our financial statements are
potentially subject to the impact of currency fluctuations between the U.S.
dollar on the one hand, and pounds sterling and euro on the other hand. We
believe this risk is not currently material since we are focused on development
activities and do not anticipate generating revenues in the short-term future.
Accordingly, we do not engage in currency hedging activities in order to
restrict the risk of exchange rate fluctuations. However, if we should commence
commercializing any products in the U.S., changes in the relation of the U.S.
dollar to the pound sterling and/or the euro may affect our revenues and
operating margins. In general, we could incur losses if the U.S. dollar should
become devalued relative to the pound sterling and/or the euro.
Holders
of our Ordinary Shares or ADSs who are U.S. residents may face adverse tax
consequences.
There
is
a risk that we will be classified as a passive foreign investment company,
or
PFIC. Our treatment as a PFIC could result in a reduction in the after-tax
return to the holders of our Ordinary Shares or ADSs and would likely cause
a
reduction in the value of such shares. For U.S. federal income tax purposes,
we
will be classified as a PFIC for any taxable year in which (i) 75% or more
of our gross income is passive income or (ii) at least 50% of the average
value of all of our assets for the taxable year produce or are held for the
production of passive income. For this purpose, passive income includes
dividends, interest, royalties, rents, annuities and the excess of gains over
losses from the disposition of assets which produce passive income. Because
we
may receive interest income and royalties, there is a risk that we will be
declared a PFIC under the income test described above. In addition, as a result
of our cash position, there is a risk under the asset test described above
that
we will be declared a PFIC in the event the price of our Ordinary Shares
declines substantially. If we were determined to be a PFIC for U.S. federal
income tax purposes, highly complex rules would apply to U.S. Holders owning
Ordinary Shares. Accordingly, you are urged to consult your tax advisors
regarding the application of such rules. However, because the determination
of
whether we are a PFIC is based upon the composition of our income and assets
from time to time, this determination cannot be made with certainty until the
end of the calendar year.
-15-
FORWARD
LOOKING STATEMENTS
This
prospectus includes forward-looking statements. These forward-looking statements
relate, among other things, to our future capital needs, our ability to further
acquire marketable products, acceptance of our products by prescribers and
end-users, competitive factors, and our marketing and sales plans. In addition,
we may make forward-looking statements in future filings with the SEC and in
written material, press releases and oral statements issued by or on behalf
of
us. Forward-looking statements include statements regarding our intent, belief
or current expectations or those of our management regarding various matters,
including statements that include forward-looking terminology such as “may,”
“will,” “should,” “believes,” “expects,” “anticipates,” “estimates,”
“continues,” or similar expressions.
Forward-looking
statements are subject to risks and uncertainties, certain of which are beyond
our control. Actual results could differ materially from those anticipated
in
these forward-looking statements as a result of various factors, including
the
factors described in the Risk Factors section beginning on page 6. Some,
but not all, of these factors are the timing of our future capital needs and
our
ability to raise additional capital when needed, uncertainty of market
acceptance of our products, our ability to compete with other pharmaceutical
companies, our ability to develop or acquire new products, problems with
important third-party manufacturers on whom we rely, our ability to attract
and
retain key personnel, and implementation and enforcement of government
regulations. This list of factors is not exclusive and other risks and
uncertainties may cause actual results to differ materially from those in
forward-looking statements.
All
forward-looking statements in this prospectus are based on information available
to us on the date hereof. We may not be required to publicly update or revise
any forward-looking statements that may be made by us or on our behalf, in
this
prospectus or otherwise, whether as a result of new information, future events
or other reasons. Because of these risks and uncertainties, the forward-looking
events and circumstances discussed in this prospectus might not
transpire.
We
changed our functional currency on January 1, 2003 to U.S. dollars to
reflect the fact that the majority of our transactions, assets and liabilities
were to be henceforth denominated in that currency. Consequently, certain
historical pound sterling amounts in this prospectus and in the material
incorporated by reference herein have been translated into U.S. Dollars. Unless
otherwise stated herein, translations of pounds sterling into and from U.S.
dollars have been made at an exchange rate of £1 to $1.6099, being the mid point
rate on December 31, 2002. The Noon Buying Rate in New York City for cable
transfers in pounds sterling as certified for customs purposes by the Federal
Reserve Bank of New York at December 31, 2002 was £1.00 to US $1.6095. We
do not believe this difference to be material. On February 25, 2005, the
Noon Buying Rate was £1.00 to US $1.9149.
Our
fiscal year ends on December 31 of each year. Where this prospectus refers
to a particular year, this means the fiscal year unless otherwise indicated.
Historically, our fiscal year ended on August 31. During 1999 our fiscal
year end date was changed to December 31.
The
SEC
allows us to incorporate by reference documents we file with the SEC, which
means that we can disclose information to you by referring you to those
documents. The information incorporated by reference is considered to be part
of
this prospectus, and certain later information that we file with
-16-
the
SEC
will automatically update and supersede this information. We incorporate by
reference the following documents:
|
(i)
|
our
Annual Report on Form 20-F for the fiscal year ended
December 31, 2003, Amendment No. 1 and Amendment No. 2 thereto, and
any additional amendments thereto; and
|
|
(ii)
|
our
reports on Form 6-K dated May 12, 2004, July 13, 2004,
July 29, 2004, August 24, 2004, September 1, 2004,
September 10, 2004, September 28, 2004, September 29, 2004,
September 30, 2004, October 4, 2004, October 7, 2004,
October 12, 2004, November 11, 2004, January 12, 2005,
January 24, 2005, February 7, 2005 and February 18,
2005.
|
All
annual reports we file with the Commission pursuant to the Securities Exchange
Act of 1934 on Form 20-F after the date of this prospectus and prior to the
termination of the offering shall be deemed to be incorporated by reference
into
this prospectus and to be part hereof from the date of filing of such documents.
We may incorporate by reference any Form 6-K subsequently submitted to the
Commission by identifying in such Form that it is being incorporated by
reference into this prospectus.
We
shall
undertake to provide without charge to each person to whom a copy of this
prospectus has been delivered, upon the written or oral request of any such
person to us, a copy of any or all of the documents referred to above that
have
been or may be incorporated into this prospectus by reference, including
exhibits to such documents, unless such exhibits are specifically incorporated
by reference to such documents. Requests for such copies should be directed
to
Amarin Corporation plc, 7 Curzon Street, London W1J 5HG, England, Attention:
Corporate Secretary, telephone +44-20-7499-9009.
You
should rely only on the information incorporated by reference or provided in
this prospectus or any prospectus supplement. We have not authorized anyone
else
to provide you with different information. This prospectus is an offer to sell
or to buy only the securities referred to in this prospectus, and only under
circumstances and in jurisdictions where it is lawful to do so. The information
contained in this prospectus or any prospectus supplement is current only as
of
the date on the front page of those documents. Also, you should not assume
that
there has been no change in our affairs since the date of this prospectus or
any
applicable prospectus supplement.
We
file
reports, including annual reports on Form 20-F, and other information with
the Securities and Exchange Commission pursuant to the rules and regulations
of
the SEC that apply to foreign private issuers. You may read and copy any
materials filed with the SEC at its Public Reference Room at 450 Fifth Street,
N.W., Washington, D.C. 20459. You may obtain information on the operation of
the
Public Reference Room by calling the Commission at 1-800-SEC-0330. The
registration statement of which this prospectus is a part, and other public
filings with the SEC, are also available on the website maintained by the SEC
at
http://www.sec.gov.
We
provide Citibank N.A., as depositary under the deposit agreement between us,
the
depositary and registered holders of the American Depositary Receipts evidencing
ADSs, with annual reports, including a review of operations, and annual audited
consolidated financial statements prepared in conformity with generally accepted
accounting principles in the United Kingdom, or UK GAAP, together with a
reconciliation of net income and total stockholders equity to generally accepted
accounting principles in the United States, or US GAAP. Upon receipt of these
reports, the depositary is obligated to promptly mail them to all record holders
of ADSs. We also furnish to the depositary all notices of meetings of holders
of
ordinary shares and other reports and communications that are made generally
available to holders of ordinary shares. The depositary undertakes to mail
to
all holders of ADSs a notice containing the information contained in any notice
of a shareholders’ meeting received
-17-
by
the
depositary, or a summary of such information. The depositary also undertakes
to
make available to all holders of ADSs such notices and all other reports and
communications received by the depositary in the same manner as we make them
available to holders of ordinary shares.
We
are a
public limited company incorporated in England and Wales. A number of our
directors and executive officers are non-residents of the United States, and
all
or a substantial portion of the assets of such persons are located outside
the
United States. As a result, it may not be possible for investors to effect
service of process within the United States upon such persons or to enforce
against them in U.S. courts judgments obtained in U.S. courts predicated upon
the civil liability provisions of the federal securities laws of the United
States. We have been advised by our English solicitors that there is doubt
as to
the enforceability in England, in original actions or in actions for enforcement
of judgments of U.S. courts, of civil liabilities to the extent predicated
upon
the federal securities laws of the United States.
Except
as
may be described otherwise in a prospectus supplement, we intend to use the
net
proceeds of any offering for general corporate purposes, which include financing
our operations, product development activities, product acquisitions and
in-licensing, and other working capital needs. We may also use the net proceeds
to repay any loan obligations that may be outstanding at the time of an
offering. Until the balance of the net proceeds is used, we intend to invest
our
net proceeds in short-term, high-quality interest-bearing
investments.
-18-
CAPITALIZATION
AND INDEBTEDNESS
The
following table sets forth, on a UK GAAP basis, our capitalization and
indebtedness, as of December 31, 2004. This table should be read in conjunction
with our consolidated financial statements for the three years ended December
31, 2003 set forth in our Annual Report on Form 20-F for the year ended December
31, 2003.
As
at
December 31, 2004 the combination of Amarin Corporation plc and Laxdale Limited
held approximately $13.0 million of cash and receivables balances.
|
Total
long-term debt
|
||||
|
Loan
notes
|
2,000
|
|||
|
Total
debt
|
2,000
|
|||
|
Shareholders’
equity:
|
||||
|
Ordinary
share capital
|
3,206
|
|||
|
Treasury
shares
|
(217
|
)
|
||
|
Capital
redemption reserve
|
27,633
|
|||
|
Share
premium account
|
87,072
|
|||
|
Profit
and loss account — (deficit)
|
(101,001
|
)
|
||
|
Total
shareholders’ equity
|
16,693
|
|||
|
Total
capitalization
|
18,693
|
|||
-19-
PRICE
HISTORY
The
following table sets forth the range of high and low closing sale prices for
our
ADSs for the periods indicated, as reported by the Nasdaq SmallCap Market.
These
prices do not include retail mark-ups, markdowns, or commissions but give effect
to a change in the number of Ordinary Shares represented by each ADS,
implemented in both October 1998 and July 2002. Historical data in the
table has been restated to take into account these changes.
|
US$
High
|
US$
Low
|
||||||
|
Fiscal
Year Ended
|
|||||||
|
December
31, 2000
|
8.50
|
3.75
|
|||||
|
December
31, 2001
|
27.97
|
5.00
|
|||||
|
December
31, 2002
|
21.00
|
2.76
|
|||||
|
December
31, 2003
|
4.81
|
1.39
|
|||||
|
December 31,
2004
|
3.99
|
0.53
|
|||||
|
Fiscal
Year Ended December 31, 2003
|
|||||||
|
First
Quarter
|
4.13
|
2.46
|
|||||
|
Second
Quarter
|
4.81
|
2.57
|
|||||
|
Third
Quarter
|
3.37
|
2.25
|
|||||
|
Fourth
Quarter
|
2.83
|
1.39
|
|||||
|
Fiscal
Year Ended December 31, 2004
|
|||||||
|
First
Quarter
|
3.50
|
1.35
|
|||||
|
Second
Quarter
|
1.46
|
0.8625
|
|||||
|
Third
Quarter
|
0.97
|
0.53
|
|||||
|
Fourth
Quarter
|
3.99
|
1.00
|
|||||
|
September
2004
|
0.94
|
0.53
|
|||||
|
October
2004
|
1.46
|
1.00
|
|||||
|
November
2004
|
3.99
|
1.47
|
|||||
|
December
2004
|
2.71
|
2.10
|
|||||
|
January
2005
|
3.40
|
2.62
|
|||||
|
February
2005
|
3.35
|
2.68
|
|||||
On
February 28, 2005, the closing price of our ADSs as reported on the Nasdaq
SmallCap Market was US$2.68 per ADS.
-20-
SHARE
CAPITAL
As
of
December 31, 2003, our authorized share capital was £100,000,000 divided
into 95,000,000 ordinary shares of £1 each and 5,000,000 3% cumulative
convertible preference shares of £1 each.
On
January 1, 2003, 9,838,158 ordinary shares and 2,000,000 preference shares
were issued and outstanding. On December 31, 2003, 17,939,786 ordinary
shares and no preference shares were issued and outstanding. All of our issued
ordinary shares and preference shares were fully paid on those
dates.
Our
board
of directors has issued all of our outstanding ordinary shares and preference
shares pursuant to the due authorization of our shareholders. Neither we nor
any
of our subsidiaries hold ordinary shares, preference shares or ADSs, except
that
our wholly-owned subsidiary Laxdale Limited holds 200,797 ADSs which were
acquired pursuant to the License Agreement dated November 24, 2000 between
Laxdale and the Company.
Convertible
Securities
All
4,129,819 of our previously issued preference shares have been converted into
ordinary shares, and those preference shares are deemed cancelled. We therefore
have the ability to issue only an additional 870,181 preference
shares.
There
were 3,625,753 ordinary shares issuable upon the exercise of outstanding options
and warrants as of December 31, 2003. In February 2004 we granted
500,000 warrants to Elan Corporation plc, which warrants are exercisable into
ordinary shares at a price of $1.90 per share. These warrants were subsequently
sold to Amarin Investment Holding Limited, an entity controlled by our Chairman,
Mr. Thomas Lynch. As of October 31, 2004 there were 4,809,417 ordinary
shares issuable upon the exercise of outstanding options and warrants. In
addition Amarin Investment Holding Limited has the right to convert
$2 million of Loan Notes currently held by it into ordinary shares at the
offering price established pursuant to any equity financing in excess of
$5 million that we may conduct in the future. During the years ended
December 31, 2003, 2002 and 2001 7,900, 34,000 and 759,813 ordinary shares,
respectively, were issued in respect of the exercise of ordinary share
options.
Changes
in Share Capital—2004
On
June 21, 2004 each of our issued ordinary shares of £1 par value was
sub-divided and converted into one ordinary share of £0.05 and one deferred
share of £0.95. Additionally, each authorized but unissued share of £1 each was
sub-divided into 20 ordinary shares of £0.05 each. A new issuance of one
ordinary share of £0.05 was subsequently made for a consideration of £1.00.
These proceeds were used by the Company to purchase the deferred shares issued
in connection with the change in nominal value. The deferred shares were then
cancelled by the Company. Following these transactions, as of June 30, 2004
our authorized capital consisted of 1,559,144,066 ordinary shares of £0.05 each,
17,939,786 deferred shares of £0.95 each, and 5,000,000 3% cumulative
convertible preference shares of £1 each, and as of such date we had 17,939,787
ordinary shares and no preference shares issued and outstanding.
On
October 7, 2004, we completed a private placement of 13,474,945 ordinary
shares to accredited investors, raising gross proceeds of US$12,775,000. The
purchase price in this offering was $0.947 per share, except that management
electing to participate in the offering paid a purchase price of $1.104 per
share. Also on October 7, 2004, Amarin Investment Holding Limited (an
entity controlled by our Chairman, Mr. Thomas G. Lynch) converted
$3 million in principal amount of outstanding Loan Notes held by it into
ordinary shares at a price of $1.104 per share, resulting in the issuance of
2,717,391 ordinary shares to Amarin Investment Holding Limited. On
October 8, 2004 we closed the acquisition of the entire issued share
capital of Laxdale Limited and, as the initial consideration for such purchase,
we issued 3,500,000 ordinary shares to the selling shareholders of Laxdale.
Following these transactions,
-21-
as
of
March 1, 2005 we had 37,771,700 ordinary shares and no preference shares
issued and outstanding. All of our issued ordinary shares are fully
paid.
Changes
in Share Capital—2003
In
January 2003, we completed a private placement of 6,093,728 ordinary shares
primarily to accredited investors in the U.S. raising gross proceeds of
approximately $21.2 million. As part of the private placement, we issued
warrants to acquire 313,234 ordinary shares to designees of the placement agent
that assisted us in the private placement. The exercise price of the warrants
is
US$3.4785 per ordinary share. The warrants are currently exercisable and expire
no later than January 26, 2008.
In
February 2003, 2,000,000 of our preference shares were converted into
ordinary shares.
Changes
in Share Capital—2002 and 2001
During
the year ended December 31, 2002, the nominal value of our ordinary shares
was converted from 10p to £1, with ten ordinary shares of 10p each being
consolidated into one ordinary share of £1 each, and 2,129,819 of our preference
shares were converted into ordinary shares.
In
2001,
100,000 ordinary shares were issued to Lehman Brothers International (Europe)
upon conversion of an unsecured loan note of US$500,000.
For
more
information on our share capital, please see our consolidated financial
statements for the three years ended December 31, 2003 beginning on page
F-1 of our Annual Report on Form 20-F for the year ended December 31,
2003. For more information on our options and warrants, please see our
consolidated financial statements for the three years ended December 31,
2003 beginning on page F-1 of our Annual Report on Form 20-F for the year
ended December 31, 2003 and Item 6 of our Annual Report on Form 20-F
for the year ended December 31, 2003 “Directors, Senior Management and
Employees.”
-22-
PLAN
OF DISTRIBUTION
We
may
sell the securities offered by this prospectus in and outside the United States
in one or more of the following ways:
| · |
through
underwriters;
|
| · |
through
dealers;
|
| · |
through
agents; or
|
| · |
directly
to purchasers.
|
We
may
sell, either directly or through agents, and underwriters may resell, the
offered securities in one or more transactions, including negotiated
transactions, at a fixed public offering price or prices, which may be changed,
at market prices prevailing at the time of sale, at prices related to such
prevailing market prices or at negotiated prices. Underwriters, dealers and
agents may engage in transactions with, or perform services for, us or our
affiliates in the ordinary course of their business.
The
prospectus supplement relating to any offering will include the following
information:
| · |
the
terms of the offering, including the aggregate number of securities
being
offered;
|
| · |
the
names of any underwriters, dealers or agents;
|
| · |
the
purchase price of the securities;
|
| · |
the
net proceeds to us from the sale of the securities;
|
| · |
any
delayed delivery arrangements;
|
| · |
any
underwriting discounts or other underwriters’ compensation;
and
|
| · |
any
discounts or concessions allowed or reallowed or paid to
dealers.
|
Sales
through Underwriters or Dealers
If
we use
underwriters in an offering using this prospectus, we will execute an
underwriting agreement with one or more underwriters. The underwriting agreement
will provide that the obligations of the underwriters with respect to a sale
of
the offered securities are subject to specified conditions precedent and that
the underwriters will be obligated to purchase all of the offered securities
if
they purchase any. Compensation to the underwriters may be in the form of
discounts, concessions or commissions. Underwriters may sell the securities
through dealers. The underwriters may change the initial offering price and
any
discounts or concessions allowed or re-allowed or paid to dealers. If we use
underwriters in an offering of securities using this prospectus, the applicable
prospectus supplement will contain a statement regarding the intention, if
any,
of the underwriters to make a market in the offered securities.
We
may
grant to the underwriters an option to purchase additional offered securities,
to cover over-allotments, if any, at the public offering price (with additional
underwriting discounts or commissions), as may be set forth in the related
prospectus supplement. If we grant any over-allotment option, the terms of
the
over-allotment option will be set forth in the prospectus supplement relating
to
such offered securities.
If
we use
a dealer in an offering of securities using this prospectus, we will sell the
offered securities to the dealer as principal. The dealer may then resell those
securities to the public or other dealers at a fixed price or varying prices
to
be determined at the time of resale.
-23-
Direct
Sales and Sales through Agents
We
may
also use this prospectus to directly solicit offers to purchase securities.
In
this case, no underwriters or agents would be involved. Except as set forth
in
the applicable prospectus supplement, none of our directors, officers or
employees will solicit or receive a commission in connection with those direct
sales. Those persons may respond to inquiries by potential purchasers and
perform ministerial and clerical work in connection with direct
sales.
We
may
also sell the offered securities through agents we designate from time to time.
In the prospectus supplement, we will describe any commission payable by us
to
the agent. Unless we inform you otherwise in the prospectus supplement, any
agent will agree to use its reasonable best efforts to solicit purchases for
the
period of its appointment.
Delayed
Delivery Contracts
If
so
indicated in the prospectus supplement relating to a particular issue of offered
securities, we may authorize underwriters and agents to solicit offers by
certain institutions to purchase securities pursuant to delayed delivery
contracts providing for payment and delivery on a future date. Institutions
with
which delayed delivery contracts may be made include commercial and savings
banks, insurance companies, educational and charitable institutions and other
institutions we may approve. The obligations of any purchaser under any delayed
delivery contract will not be subject to any conditions except that any related
sale of offered securities to underwriters shall have occurred and the purchase
by an institution of the securities covered by its delayed delivery contract
shall not at the time of delivery be prohibited under the laws of any
jurisdiction to which that institution is subject. Any commission paid to agents
and underwriters soliciting purchases of securities pursuant to delayed delivery
contracts accepted by us will be detailed in the prospectus
supplement.
Indemnification
Underwriters,
dealers or agents participating in a distribution of securities using this
prospectus may be deemed to be underwriters under the Securities Act. Pursuant
to agreements that we may enter into, underwriters, dealers or agents who
participate in the distribution of securities by use of this prospectus may
be
entitled to indemnification by us against certain liabilities, including
liabilities under the Securities Act, or contribution with respect to payments
that those underwriters, dealers or agents may be required to make in respect
of
those liabilities.
The
following summarizes recent material events relating to our business, including
material changes in our affairs that have occurred since December 31, 2003,
the end of the most recent fiscal year for which audited financial statements
are included in the registration statement of which this prospectus is a part.
This discussion should be read in conjunction with the other information
included in this prospectus, including “Risk Factors” beginning on page 6.
You should also refer to the information contained in the documents incorporated
herein by reference, including our Annual Report on Form 20-F for the year
ended December 31, 2003, as amended by Amendment No. 1 and Amendment No. 2
thereto, and the audited financial statements contained therein, together with
our quarterly financial statements as of and for the three months ended
March 31, 2004 (unaudited), as of and for the six months ended
June 30, 2004 (unaudited), as of and for the nine months ended
September 30, 2004 (unaudited) and as of and for the twelve months ended
December 31, 2004 (unaudited), and our Notice of Extraordinary General
Meeting issued August 31, 2003, furnished to the SEC under cover of a
Form 6-K dated September 1, 2004.
-24-
Laxdale
Acquisition
On
October 8, 2004 we closed an acquisition of the entire issued share capital
of Laxdale Limited, a privately owned neuroscience development company based
in
Stirling, Scotland. The purchase price for the acquisition of Laxdale comprises
an initial consideration of 3.5 million ADSs representing 3.5 million
ordinary shares of 5p each in the capital of Amarin and certain success based
milestone payments described below, payable on a pro rata basis to the
shareholders of Laxdale. As a result of this transaction Laxdale has become
a
wholly owned subsidiary of Amarin. Accordingly, Amarin has assumed Laxdale’s
outstanding net liabilities in the amount of approximately GBP£1.3million($2.4
million), which includes debt obligations in the amount of GBP£1 million
($1.8 million) to Amarin. Additionally Amarin, as Laxdale’s parent company,
has responsibility and potentially liability on a consolidated basis for
Laxdale’s obligations under its existing contracts. Laxdale’s material contracts
include certain licenses of marketing rights to Miraxion, and/or related
intellectual property, for Huntington’s disease in Europe and Japan. These
licenses include obligations upon Laxdale to fund and manage clinical trials.
A
range of royalties and further success based milestones are payable to Laxdale
by its licensees upon approval and sale of a product pursuant to such
licenses.
Pursuant
to the Laxdale share purchase agreement further success-related milestones
will
be payable as follows:
| · |
On
receipt of a marketing approval in each of the U.S. and/or Europe
for the
first indication of any product containing Laxdale intellectual property,
we must make a stock or cash payment (at the sellers’ sole option) of
GBP£7.5 million for each of such two potential market approvals (i.e.
GBP£15.0 million maximum); and
|
| · |
On
receipt of a marketing approval in each of the U.S. and/or Europe
for any
other product using Laxdale intellectual property or for a different
indication of a previously approved product, we must make a stock
or cash
payment (at the sellers’ sole option) of GBP£5 million for each of
such two potential market approvals (i.e. GBP£10 million
maximum).
|
Under
the
share purchase agreement, we have received certain warranties from Belsay
Limited, the principal shareholder of Laxdale, which are enforceable for a
period of 15 months following the closing of the transaction. The liability
of Belsay Limited under the warranties is secured by an arrangement whereby
the
2,625,000 initial shares issued by us to Belsay (comprising 75% of the aggregate
of 3.5 million initial shares issued to the shareholders of Laxdale) are
placed in escrow. Belsay has the right to sell the escrowed shares, but it
will
be entitled to receive only 10 percent of the cash proceeds from such
sales, and the balance will be held in escrow and will not be released to Belsay
during the 15-month warranty period except to the extent the escrow account
has
in excess of $3.5 million of cash. If Belsay becomes obligated to indemnify
us for any claims arising under the share purchase agreement, we are entitled
to
withdraw from the escrow account either cash or shares having a value equal
to
the amount of the claim. However, we may be legally restricted from selling
the
shares in escrow and therefore, to the extent there is insufficient cash in
the
escrow account we may not have any means of generating cash to offset
liabilities resulting from any breach.
The
escrow arrangements permit a graduated sale of the initial shares issued to
Belsay in accordance with the following:
|
Time
period from closing of transaction
|
No
of shares Belsay can sell*
|
|
0-90
days
|
Up
to a net proceeds level of $100,000**
|
|
90-180
days
|
643,125
|
|
180-270
days
|
1,285,250
|
|
270-360
days
|
1,929,375
|
-25-
|
*
|
on
a cumulative basis assuming no sales in previous periods, and subject
to
restrictions on transfer imposed under U.S. securities laws.
|
|
**
|
sales
are permitted during this period only to the extent the proceeds
are used
to defray Belsay’s legal expenses relating to the
transaction.
|
Prior
to
the closing of the Laxdale acquisition, Laxdale drew down approximately
GBP£1.0 million under a loan facility that we provided. This loan bears
interest calculated at the Bank of Scotland’s base rate plus 3 percent. As
of September 30, 2004 the entire principal amount of the loan and all
accrued interest thereon became repayable at any time within thirty days of
written demand by us, in pounds sterling in immediately available funds, without
any set-off, counterclaim, withholding or deduction for any reason whatsoever
by
Laxdale except as required by law. This Loan is secured by a floating charge
against Laxdale’s assets. This funding was provided in four installments in
June, July and August 2004 to enable Laxdale to continue operating its
business, as Laxdale would otherwise have been unable to pay its obligations
as
they came due.
Pursuant
to the Laxdale share purchase agreement, we have agreed to use reasonable
commercial efforts to (i) continue the Phase III trial for Miraxion in
Huntington’s disease and, upon successful completion thereof, pursue FDA
approval for such indication, (ii) pursue approval of Miraxion in Europe
for the treatment of Huntington’s disease and (iii) conduct development
activities and pursue U.S. and European approvals for indications other than
Huntington’s disease. Reasonable commercial efforts are defined in the share
purchase agreement as efforts consistent with industry practice for the
development of products of similar performance and potential. However, we are
not required to pursue development efforts for Huntington’s disease or other
indications if our board of directors reasonably determines in good faith that
it is not commercially or scientifically viable to do so or that it is not
appropriate to continue development due to patient safety concerns.
In
connection with the acquisition of Laxdale we filed a registration statement
in
respect of the initial 3.5 million ordinary shares issued to the
shareholders of Laxdale and a portion of the contingent shares issuable post
closing. We have agreed to use commercially reasonable efforts to maintain
such
registration statement in effect through March 30, 2006. We have also
agreed to use reasonable commercial efforts to file registration statements
in
respect of the contingent shares to be issued upon any of the success
milestones, each of which is subject to the acceptance of a New Drug Application
(NDA) by a relevant regulatory authority. Such registration statements must
be
filed within 90 days after NDA acceptance if fast track status has been
granted and otherwise within 270 days after NDA acceptance. We have agreed
to use commercially reasonable efforts to maintain any such subsequent
registration statement in effect for one year after the effective date thereof.
In addition, the sellers have the right (exercisable only once) to include
their
unsold securities in any registration statement filed by us for our own account
or on behalf of other selling shareholders.
In
conjunction with our acquisition of Laxdale, Laxdale has entered into
re-negotiated cross-licensing agreements with Scarista Limited which provide
Laxdale with rights to specified intellectual property covering the United
States, Canada, the European Union and Japan. Scarista has granted a license
to
Laxdale pursuant to which Laxdale has the exclusive right to use certain of
Scarista’s intellectual property (including intellectual property for the use of
Miraxion in drug-resistant depression) within a field of use encompassing all
psychiatric and central nervous system disorders, and within the territories
of
the United States, Canada, the European Union and Japan. As part of such
re-negotiation Scarista is entitled to receive reduced royalty payments of
5% on
all net sales by Laxdale of products utilising such Scarista intellectual
property. In consideration of Scarista entering into these agreements and the
reduction of Scarista’s royalty from 15% to 5%, Laxdale has paid a signing fee
of £500,000 to Scarista. The Scarista intellectual property licensed to Laxdale
is material to our development efforts with respect to Miraxion. In addition,
Laxdale has granted a license to Scarista pursuant to which Scarista has the
exclusive right to use certain of Laxdale’s intellectual property
-26-
(including
intellectual property for the use of Miraxion in Huntington’s disease) within a
field of use encompassing all psychiatric and central nervous system disorders,
and on a worldwide basis in all territories other than the United States,
Canada, the European Union and Japan. Laxdale is entitled to receive royalty
payments of 5% on all net sales by Scarista or its licensees of products
utilising such Laxdale intellectual property. Under each of these license
agreements royalties are payable until the latest to occur of (i) the
expiration of the last patent relating to any product using the licensed
technology, (ii) the expiration of regulatory exclusivity with respect to
any product using the licensed technology or (iii) the date on which the
licensed technology ceases to be secret and substantial in a given territory.
Upon the termination of royalty payment obligations with respect to any product,
the licensee will thereafter have a fully paid up, royalty free, non-exclusive
license to continue using the licensed technology in respect of such
product.
Miraxion
has been partnered for Huntington’s disease in the majority of the major
European Union markets. Additionally, Laxdale has licensed out the right to
develop, use and sell products incorporating certain of its intellectual
property in Japan for the treatment of certain central nervous system disorders
(including Huntington’s disease, schizophrenia and depression).
Private
Placement
In
October 2004 we completed a private placement of 13,474,945 ordinary shares
to accredited investors consisting of new and existing shareholders and
management. Gross proceeds to the Company were $12.775 million, and net
proceeds after deduction of selling commissions and estimated offering expenses
would be $12.09 million. The purchase price was $0.947 per share based on
the average closing price of our ADSs on the Nasdaq SmallCap Market for the
ten
trading days ended October 6, 2004; however, management investors paid a
purchase price of $1.04 per share based on the average closing price of our
ADSs
on the Nasdaq SmallCap Market for the five trading days ended October 6,
2004.
Purchase
of Elan Debt and Equity by Our Chairman
On
September 30, 2004 Amarin Investment Holding Limited, an entity controlled
by our Chairman, Mr. Thomas Lynch, declared an interest to Amarin in the
following securities in Amarin following their purchase from Elan Corporation
plc and its affiliated companies:
| · |
4,653,819
ADSs;
|
| · |
Warrants
to subscribe for 500,000 Ordinary Shares at an exercise price of
US$1.90
per share; and
|
| · |
US$5 million
in aggregate principal amount of Secured Loan Notes (the “Loan Notes”) due
2009, issued pursuant to a loan note instrument dated February 25,
2004.
|
The
Board
of Directors of Amarin reviewed and approved this transaction after consultation
with certain of its advisors.
Conversion
of Debt
Following
its acquisition of equity and debt securities of Amarin from Elan Corporation
plc, Amarin Investment Holding Limited converted $3 million of the
$5 million in principal amount of loan notes acquired by it into ordinary
shares of Amarin. The debt was converted at a price of $1.104 per share. This
transaction was reviewed by Amarin’s audit committee and approved by our
disinterested directors. The shares issued pursuant to such debt conversion
are
subject to a lockup agreement restricting their sale for a period of six months
from October 8, 2004. The remaining $2 million in principal amount of
the loan notes is payable in January 2009, and interest thereon accrues at
the rate of 8% per annum and is payable on a semi-annual basis. Amarin
Investment Holding Limited can, at
-27-
its
option, convert such remaining principal amount into ordinary shares at the
offering price established by the Company pursuant to any equity financing
in
excess of $5 million that we may conduct in the future, subject to the
review of Amarin’s audit committee and approval of Amarin’s disinterested
directors.
Compliance
with Nasdaq Listing Requirements
In
August 2004
Nasdaq informed us that, based on financial results for the six-months ended
June 30, 2004, we did not comply with the minimum shareholders’ equity
threshold of $2.5 million as set forth in Marketplace
Rule 4310(c)(2)(B). On October 13, 2004 Nasdaq advised us of its
determination that, based on the completion of our private placement and debt
conversion (as described above), we had re-established compliance with the
shareholders’ equity requirement. However, Nasdaq will continue to monitor our
ongoing compliance with the shareholders’ equity requirement and other listing
requirements.
Valeant
Settlement
In
February 2004 we sold our U.S. subsidiary, Amarin Pharmaceuticals, Inc
(API), and certain assets to Valeant Pharmaceuticals International (Valeant).
The asset purchase agreement for the transaction provided for a purchase price
adjustment based on variations between a pro forma balance sheet agreed between
the parties and a closing date balance sheet to be prepared after the closing.
Subsequent to the closing of the sale, one of API’s wholesalers advised that it
was holding approximately US$6 million of product inventory that it had not
previously discovered. Amarin and Valeant disputed the impact of such inventory
on the closing date balance sheet and the respective parties’ responsibility for
incremental wholesaler inventory.
On
September 27, 2004, Amarin signed a settlement agreement with Valeant in
respect of this dispute in full and final settlement of all such matters as
between Valeant and Amarin. Pursuant to this settlement agreement Amarin has
agreed to forego part of the contingent milestones payable by Valeant to Amarin
due under the asset purchase agreement, namely the entire $5 million
contingent milestone payable on FDA approval of Zelapar and $1 million of
the $3 million contingent milestone previously due when the remaining
safety studies are successfully completed. Also, Valeant has agreed that Amarin
is no longer required to purchase $414,000 of further inventory from wholesalers
and the remaining $2 million of the contingent milestone previously due
upon successful completion of the remaining Zelapar safety studies has been
paid
on November 30, 2004 without any such contingency. Elan Corporation plc
received $1 million of such $2 million payment as part of the
settlement entered into between Elan and Amarin on February 25,
2004.
Change
of Chief Financial Officer
In
May 2004, we appointed Alan Cooke as our new Chief Financial Officer,
following the resignation of our prior CFO Ian Garland. Prior to joining Amarin,
Mr. Cooke spent approximately eight years at Elan Corporation, plc, most
recently as Vice President, Global Strategic Planning. Mr. Cooke is a member
of
the Institute of Chartered Accountants (Ireland) and trained at KPMG, Dublin.
Mr. Cooke is also a member of Amarin’s board of directors.
Our
authorized capital stock is £100,000,000 divided into 1,559,144,066 ordinary
shares of £0.05 each, 17,939,786 deferred shares of £0.95 each, and 5,000,000 3%
cumulative convertible preference shares of £1 each. The following summarizes
certain information concerning the ordinary shares based on English law and
a
summary of certain provisions of the Memorandum and Articles of Association
of
the Company. This information and summary are not complete and you should refer
to the full text of
-28-
the
Memorandum and Articles of Association, copies of which have been filed with
the
Securities and Exchange Commission.
General
In
the
following summary, a “shareholder” is the person registered in our register of
members as the holder of the relevant share(s). For those shares that have
been
deposited in our American Depositary Receipt facility, Citibank, N.A. as
depositary is deemed the shareholder. The rights of ADR holders are described
below under “Description of American Depositary Shares.”
Dividends
Holders
of Ordinary Shares are entitled to receive such dividends as may be declared
by
the board of directors. All dividends are declared and paid according to the
amounts paid up on the shares in respect of which the dividend is paid. To
date
there have been no dividends paid to holders of Ordinary Shares.
Any
dividend unclaimed after a period of twelve years from the date of declaration
of such dividend shall be forfeited and shall revert to us. In addition, the
payment by the board of directors of any unclaimed dividend, interest or other
sum payable on or in respect of an Ordinary Share or a Preference Share into
a
separate account shall not constitute us as a trustee in respect
thereof.
Rights
in a Liquidation
Holders
of Ordinary Shares are entitled to participate in any distribution of assets
upon a liquidation, subject to prior satisfaction of the claims of creditors
and
preferential payments to holders of outstanding Preference Shares.
Voting
Rights
Voting
at
any general meeting of shareholders is by a show of hands, unless a poll is
demanded. A poll may be demanded by:
| · |
the
chairman of the meeting;
|
| · |
at
least two shareholders entitled to vote at the meeting;
|
| · |
any
shareholder or shareholders representing in the aggregate not less
than
one-tenth of the total voting rights of all shareholders entitled
to vote
at the meeting; or
|
| · |
any
shareholder or shareholders holding shares conferring a right to
vote at
the meeting on which there have been paid up sums in the aggregate
equal
to not less than one-tenth of the total sum paid up on all the shares
conferring that right.
|
In
a vote
by a show of hands, every shareholder who is present in person at a general
meeting has one vote. In a vote on a poll, every shareholder who is present
in
person or by proxy shall have one vote for every share of which they are
registered as the holder. The quorum for a shareholders’ meeting is a minimum of
two persons, present in person or by proxy.
Holders
of ADSs are also entitled to vote by supplying their voting instructions to
Citibank who will vote the Ordinary Shares represented by their ADSs in
accordance with their instructions. The ability of Citibank to carry out voting
instructions may be limited by practical and legal limitations, the terms of
our
articles and memorandum of association, and the terms of the Ordinary Shares
on
deposit. We cannot assure the holders of our ADSs that they will receive voting
materials in time to enable them to return voting instructions to Citibank
a
timely manner.
-29-
Unless
otherwise required by law or the articles of association, voting in a general
meeting is by ordinary resolution. An ordinary resolution is approved by a
majority vote of the shareholders present at a meeting at which there is a
quorum. Examples of matters that can be approved by an ordinary resolution
include:
| · |
the
election of directors;
|
| · |
the
approval of financial statements;
|
| · |
the
declaration of final dividends;
|
| · |
the
appointment of auditors;
|
| · |
the
increase of authorized share capital; or
|
| · |
the
grant of authority to issue shares.
|
A
special
resolution or an extraordinary resolution requires the affirmative vote of
not
less than three-fourths of the eligible votes. Examples of matters that must
be
approved by a special resolution include modifications to the rights of any
class of shares, certain changes to the memorandum or articles of association,
or our winding-up.
Capital
Calls
The
board
of directors has the authority to make calls upon the shareholders in respect
of
any money unpaid on their shares and each shareholder shall pay to us as
required by such notice the amount called on his shares. If a call remains
unpaid after it has become due and payable, and the fourteen days notice
provided by the board of directors has not been complied with, any share in
respect of which such notice was given, may be forfeited by a resolution of
the
board.
Pre-emptive
Rights
English
law provides that shareholders have pre-emptive rights to subscribe to any
issuances of equity securities that are or will be paid wholly in cash. These
rights may be waived by a special resolution of the shareholders, either
generally or in specific instances, for a period not exceeding five years.
Pursuant to resolutions passed at our annual general meeting on 21
June 2004, our directors are duly authorized during the period ending on 21
June 2008 to exercise all of our powers to allot our securities and to make
any offer or agreement which would or might require such securities to be
allotted after that date. The aggregate nominal amount of the relevant
securities that may be allotted under the authority cannot exceed £77,060,214
(equivalent to 1,541,204,280 Ordinary Shares). Under these resolutions we are
empowered to allot such Ordinary Shares as if English statutory pre-emption
rights did not apply to such issuance and, therefore, without first offering
such Ordinary Shares to our existing shareholders.
Redemption
Provisions
Subject
to the Companies Act 1985 (as amended), as applicable to English companies,
and
with the sanction of a special resolution, shares in us may be issued with
terms
that provide for mandatory or optional redemption. The terms and manner of
redemption would be provided for by the alteration of our articles of
association.
Subject
to the Companies Act of 1985, we may also purchase in any manner the board
of
directors considers appropriate any of our own Ordinary Shares, Preference
Shares or any other shares of any class (including redeemable shares) at any
price.
-30-
Variation
of Rights
If
at any
time our share capital is divided into different classes of shares, the rights
of any class may be varied or abrogated with the written consent of the holders
of not less than 75% of the issued shares of the class, or pursuant to an
extraordinary resolution passed at a separate meeting of the holders of the
shares of that class. At any such separate meeting the quorum shall be a minimum
of two persons holding or representing by proxy one-third in nominal amount
of
the issued shares of the class, unless such separate meeting is adjourned,
in
which case the quorum at such adjourned meeting or any further adjourned meeting
shall be one person. Each holder of shares of that class has one vote per share
at such meetings.
Meetings
of Shareholders
The
board
of directors may call general meetings and general meetings may also be called
on the requisition of our shareholders representing at least one tenth of the
voting rights in general meeting pursuant to section 368 of the Companies
Act 1985. Annual general meetings are convened upon advance notice of
21 days. Extraordinary general meetings are convened upon advance notice of
21 days or fourteen days depending on the nature of the business to be
transacted.
Citibank
will mail to the holders of ADSs any notice of shareholders’ meeting received
from us, together with a statement that holders will be entitled to instruct
Citibank to exercise the voting rights of the Ordinary Shares represented by
ADSs and information explaining how to give such instructions.
Limitations
on Ownership
There
are
currently no UK foreign exchange controls on the payment of dividends on our
Ordinary Shares or the conduct of our operations. There are no restrictions
under our memorandum and articles of association or under English law that
limit
the right of non-resident or foreign owners to hold or vote our Ordinary Shares,
Preference Shares or ADSs.
Change
of Control
Save
as
expressly permitted by the Companies Act of 1985, we shall not give financial
assistance, whether directly or indirectly, for the purposes of the acquisition
of any of our shares or for reducing or discharging any liability incurred
for
the purpose of such acquisition.
If
an
offer is made to acquire more than half of our issued Ordinary Share capital
and
such offer has been recommended by the board, we will use reasonable endeavors
to procure that a like offer is extended to the holders of the Preference Shares
and that such offer remains open for not less than the acceptance period open
to
the holders of Ordinary Shares to enable the holders of Preference Shares to
convert any or all of their Preference Shares and accept the offer if they
wish
to do so.
Disclosure
of Interests
Under
English Law, any person who acquires an equity interest above a “notifiable
percentage” must disclose certain information to us regarding the person’s
shares. The applicable threshold is currently 3%. The disclosure requirement
applies to both persons acting alone or, in certain circumstances, with others.
After a person’s holdings exceed the “notifiable” level, similar notifications
must be made when the ownership percentage figure increases or decreases by
a
whole number.
In
addition, Section 212 of the Companies Act of 1985 gives us the authority
to require certain disclosure regarding an equity interest if we know, or have
reasonable cause to believe, that the shareholder is interested or has within
the previous three years been interested in our share capital. Failure to supply
the information required may lead to disenfranchisement under our articles
of
association of the relevant shares and a prohibition on their transfer and
on
dividend or other
-31-
payments.
Under the deposit agreement with Citibank pursuant to which the ADRs have been
issued, a failure to provide certain information pursuant to a similar request
may result in the forfeiture by the holder of the ADRs of rights to direct
the
voting of the Ordinary Shares underlying the ADSs and to exercise certain other
rights with respect to the Ordinary Shares.
Citibank,
N.A. acts as the depositary bank for our American Depositary Shares. Citibank’s
depositary offices are located at 111 Wall Street, New York, New York 10005.
American Depositary Shares are frequently referred to as “ADSs” and represent
ownership interests in securities that are on deposit with the depositary bank.
ADSs are represented by certificates that are commonly known as “American
Depositary Receipts” or “ADRs.” The depositary bank typically appoints a
custodian to safekeep the securities on deposit. In this case, the custodian
is
the London office of Citibank, N.A., located at Cottons Center, Hays Lane,
London SE1 2QT, England.
We
have
appointed Citibank as depositary bank pursuant to a deposit agreement. A copy
of
the deposit agreement is on file with the SEC under cover of a Registration
Statement on Form F-6. You may obtain a copy of the deposit agreement from
the SEC’s Public Reference Room at 450 Fifth Street, N.W., Washington, D.C.
20549. Please refer to Registration Number 333-5946 when retrieving such
copy.
We
are
providing you with a summary description of the material terms of the ADSs
and
of the material rights of owners of ADSs. Please remember that summaries by
their nature lack the precision of the information summarized and that a
holder’s rights and obligations as an owner of ADSs will be determined by
reference to the terms of the deposit agreement and not by this summary. If
you
intend to hold ADSs, we urge you to review the deposit agreement in its
entirety.
Each
ADS
represents one ordinary share on deposit with the custodian. An ADS will also
represent any other property received by the depositary bank or the custodian
on
behalf of the owner of the ADS but that has not been distributed to the owners
of ADSs because of legal restrictions or practical considerations.
If
you
become an owner of ADSs, you will become a party to the deposit agreement and
therefore will be bound to its terms and to the terms of the ADR that represents
your ADSs. The deposit agreement and the ADR specify our rights and obligations
as well as your rights and obligations as owner of ADSs and those of the
depositary bank. As an ADS holder you appoint the depositary bank to act on
your
behalf in certain circumstances. The deposit agreement and the ADRs are governed
by New York law. However, our obligations to the holders of ordinary shares
will
continue to be governed by the laws of England and Wales, which may be different
from the laws in the United States.
As
an
owner of ADSs, you may hold your ADSs either by means of an ADR registered
in
your name or through a brokerage or safekeeping account. If you decide to hold
your ADSs through your brokerage or safekeeping account, you must rely on the
procedures of your broker or bank to assert your rights as ADS owner. Please
consult with your broker or bank to determine what those procedures are. This
summary description assumes you have opted to own the ADSs directly by means
of
an ADR registered in your name and, as such, we will refer to you as the holder
When we refer to you we assume the reader owns ADSs and will own ADSs at the
relevant time.
-32-
Dividends
and Distributions
As
a
holder, you generally have the right to receive the distributions we make on
the
securities deposited with the custodian bank. Your receipt of these
distributions may be limited, however, by practical considerations and legal
limitations. Holders will receive such distributions under the terms of the
deposit agreement in proportion to the number of ADSs held as of a specified
record date.
Distributions
of Cash
Upon
receipt of a cash dividend or other cash distribution, the depositary bank
will
arrange for the funds to be converted into U.S. dollars and for the distribution
of the U.S. dollars to the holders, subject to English laws and
regulations.
The
conversion into U.S. dollars will take place only if this can be done on a
reasonable basis, in the judgment of the depositary bank, and if the U.S.
dollars are transferable to the United States. The amounts distributed to
holders will be net of the fees, expenses, taxes and governmental charges
payable by holders under the terms of the deposit agreement. The depositary
will
apply the same method for distributing the proceeds of the sale of any property,
such as undistributed rights, held by the custodian in respect of securities
on
deposit.
Distributions
of Shares
Upon
receipt of a free distribution of ordinary shares, the depositary bank will
either
distribute
to holders new ADSs representing the ordinary shares deposited with the
custodian or
modify
the ADS to ordinary shares ratio, in which case each ADS you hold will represent
rights and interests in the additional Shares so deposited. Only whole new
ADSs
will be distributed. Fractional entitlements will be sold and the proceeds
of
such sale will be distributed as in the case of a cash
distribution.
The
distribution of new ADSs or the modification of the ADS-to-share ratio upon
a
distribution of ordinary shares will be made net of the fees, expenses, taxes
and governmental charges payable by holders under the terms of the deposit
agreement. In order to pay such taxes or governmental charges, the depositary
bank may sell all or a portion of the new ordinary shares so
distributed.
No
such
distribution of new ADSs will be made if it would violate the U.S. securities
laws or other applicable law. If the depositary bank does not distribute new
ADSs or change the ADS ratio as described above, it may sell the ordinary shares
received and distribute the proceeds of the sale as in the case of a
distribution of cash.
Distributions
of Rights
In
the
event that we distribute rights to purchase additional ordinary shares, the
depositary bank will determine whether it is lawful and feasible to distribute
rights to purchase additional ADSs to holders.
The
depositary bank will establish procedures to distribute rights to purchase
additional ADSs to holders and to enable such holders to exercise such rights
if
it is lawful and feasible to make the rights available to holders of ADSs.
We
may be required to provide certain documentation contemplated in the deposit
agreement, such as opinions to address the lawfulness of the transaction. You
may have to pay fees, expenses, taxes and other governmental charges to
subscribe for the new ADSs upon the exercise of your rights.
The
depositary bank will not
distribute
the rights to you if:
| · |
It
is not lawful or feasible to distribute the rights
|
| · |
We
fail to deliver satisfactory documents to the depositary bank;
or
|
| · |
It
appears that the rights are about to lapse.
|
-33-
The
depositary bank will sell the rights that are not exercised or not distributed
if such sale is lawful and reasonably practicable. The proceeds of such sale
will be distributed to holders as in the case of a cash distribution. If the
depositary bank is unable to sell the rights, it will allow the rights to
lapse.
Other
Distributions
If
we
distribute property other than cash, ordinary shares or rights to purchase
additional ordinary shares, and if we provide all of the documentation
contemplated in the deposit agreement, the depositary bank will distribute
the
property to the holders in a manner it deems equitable and
practicable.
The
distribution will be made net of fees, expenses, taxes and governmental charges
payable by holders under the terms of the deposit agreement. In order to pay
such taxes and governmental charges, the depositary bank may sell all or a
portion of the property received.
If
in the
opinion of the depositary bank a distribution is not feasible, it will
not
distribute
the property to you and may sell the property with our reasonable approval.
The
depositary bank may deem a distribution not to be feasible if:
| · |
Any
amounts are required to be withheld for taxes or governmental
charges;
|
| · |
Any
obligations arise under applicable securities laws or exchange control
laws; or
|
| · |
There
is any requirement that distributable securities be registered under
the
Securities Act of 1933 or otherwise.
|
The
proceeds of such a sale will be distributed to holders as in the case of a
cash
distribution.
Changes
Affecting Ordinary Shares
The
ordinary shares held on deposit for your ADSs may change from time to time.
For
example, there may be a change in nominal or par value, a split-up,
cancellation, consolidation or reclassification of such ordinary shares or
a
recapitalization, reorganization, merger, consolidation or sale of
assets.
If
any
such change were to occur, your ADSs would represent the right to receive the
property received or exchanged in respect of the ordinary shares held on
deposit. The depositary bank may in such circumstances deliver new ADSs to
you
or call for the exchange of your existing ADSs for new ADSs. If the depositary
bank may not lawfully distribute such property to you, the depositary bank
may
sell such property and distribute the net proceeds to you as in the case of
a
cash distribution.
Issuance
of ADSs upon Deposit of Ordinary Shares
The
depositary bank may create ADSs on your behalf if you or your broker deposit
ordinary shares with the custodian. The depositary bank will deliver these
ADSs
to the person you indicate only after you pay any applicable issuance fees
and
any charges and taxes payable for the transfer of the ordinary shares to the
custodian. Your ability to deposit ordinary shares and receive ADSs may be
limited by U.S. and UK legal considerations applicable at the time of deposit.
Ordinary shares will not be accepted for deposit until the depositary bank
receives evidence that there has been compliance with English currency exchange
regulations. The depositary bank will only issue ADSs in whole
numbers.
When
you
make a deposit of ordinary shares, you will be responsible for transferring
good
and valid title to the depositary bank. As such, you will be deemed to represent
and warrant that:
| · |
The
ordinary shares are validly issued, fully paid and
non-assessable.
|
-34-
| · |
All
preemptive rights, if any, with respect to such ordinary shares have
been
validly waived or exercised.
|
| · |
You
are duly authorized to deposit the ordinary shares.
|
| · |
The
ordinary shares presented for deposit are not restricted securities
as
defined in the deposit agreement.
|
| · |
The
ordinary shares presented for deposit have not been stripped of any
rights
or entitlements.
|
Withdrawal
of Shares Upon Cancellation of ADSs
As
a
holder, you will be entitled to present your ADSs to the depositary bank for
cancellation and then receive the corresponding number of underlying ordinary
shares at the custodian’s offices. Your ability to withdraw the ordinary shares
may be limited by U.S. and UK law considerations applicable at the time of
withdrawal. In order to withdraw the ordinary shares represented by your ADSs,
you will be required to pay to the depositary the fees for cancellation of
ADSs
and any charges and taxes payable in connection with the surrender and
withdrawal. You assume the risk for delivery of all funds and securities upon
withdrawal. Once canceled, the ADSs will not have any rights under the deposit
agreement.
If
you
hold an ADR registered in your name, the depositary bank may ask you to provide
proof of identity and genuineness of any signature and such other documents
as
the depositary bank may deem appropriate before it will cancel your ADSs. The
withdrawal of the ordinary shares represented by your ADSs may be delayed until
the depositary bank receives satisfactory evidence of compliance with all
applicable laws and regulations. Please keep in mind that the depositary bank
will only accept ADSs for cancellation that represent a whole number of
securities on deposit.
You
will
have the right to withdraw the securities represented by your ADSs at any time
except for:
| · |
Temporary
delays that may arise because (i) the transfer books for the ordinary
shares or ADSs are closed, or (ii) ordinary shares are immobilized on
account of a shareholders’ meeting or a payment of dividends.
|
| · |
Obligations
to pay fees, taxes and similar charges.
|
| · |
Restrictions
imposed because of laws or regulations applicable to ADSs or the
withdrawal of securities on deposit.
|
The
deposit agreement may not be modified to impair your right to withdraw the
securities represented by your ADSs.
Voting
Rights
As
a
holder, you generally have the right under the deposit agreement to instruct
the
depositary bank to exercise the voting rights for the ordinary shares
represented by your ADSs. The voting rights of holders of ordinary shares are
described in “Description of Ordinary Shares.”
The
depositary bank will mail to you any notice of shareholders’ meeting received
from us, together with a statement that holders will be entitled to instruct
the
depositary bank to exercise the voting rights of the securities represented
by
ADSs, and information explaining how to give such instructions.
If
the
depositary bank timely receives voting instructions from a holder of ADSs,
it
will endeavor to vote the securities represented by the holder’s ADSs in
accordance with such voting instructions.
-35-
If
no
such instructions are received, the depositary bank will deem the holders to
have granted a discretionary proxy to the person designated by us, unless we
request otherwise. However, no discretionary proxy will be deemed granted for
any proposition:
| · |
that
involves the solicitation of opposing proxies or other substantial
opposition; or
|
| · |
that
authorizes a merger, consolidation or other matter that may materially
affect the rights and privileges of holders.
|
The
depositary bank has agreed to appoint one or more representatives to vote at
shareholder meetings either on a show or hands or a poll. In general, proxies
may be voted only if a vote on a poll is duly demanded. See “Description of
Ordinary Shares—Voting Rights.” The depositary bank will not join in demanding a
vote on a poll unless instructed by at least two holders or holders owning
at
least 10% of the voting interests of all holders. If a poll is not demanded,
the
depositary bank shall follow the instructions of a majority in interest of
the
holders.
Please
note that the ability of the depositary bank to carry out voting instructions
may be limited by practical and legal limitations, the terms of our Articles
and
Memorandum of Association, and the terms of the securities on deposit. We cannot
assure you that you will receive voting materials in time to enable you to
return voting instructions to the depositary bank in a timely manner. Securities
for which no voting instructions have been received will not be
voted.
Fees
and Charges
As
an ADS
holder, you will be required to pay the following service fees to the depositary
bank:
|
Service
|
Fees
|
|
Issuance
of ADSs
|
Up
to 5¢ per ADS issued (or portion thereof)
|
|
Cancellation
of ADSs
|
Up
to 5¢ per ADS canceled (or portion
thereof)
|
As
an ADS
holder you will also be responsible to pay certain fees and expenses incurred
by
the depositary bank and certain taxes and governmental charges such
as:
| · |
Fees
for the transfer and registration of ordinary shares charged by the
registrar and transfer agent for the ordinary shares in England (
i.e.
,
upon deposit and withdrawal of ordinary shares).
|
| · |
Expenses
incurred for converting foreign currency into U.S. dollars.
|
| · |
Expenses
for cable, telex and fax transmissions and for delivery of
securities.
|
| · |
Taxes
and duties upon the transfer of securities ( i.e.
,
when ordinary shares are deposited or withdrawn from
deposit).
|
We
have
agreed to pay certain other charges and expenses of the depositary bank. Note
that the fees and charges you may be required to pay may vary over time and
may
be changed by us and by the depositary bank. You will receive prior notice
of
such changes.
Amendments
and Termination
We
may
agree with the depositary bank to modify the deposit agreement at any time
without your consent. We undertake to give holders 3 months prior notice of
any modifications that would prejudice any substantial rights of the holders
under the deposit agreement. We will not consider to be prejudicial to your
substantial rights any modifications or supplements that are reasonably
necessary for the ADSs to be registered under the Securities Act of 1933 or
to
be eligible for book-entry settlement, in each case without imposing or
increasing the fees and charges you are required to pay.
-36-
You
will
be bound by the modifications to the deposit agreement if you continue to hold
your ADSs after the modifications to the deposit agreement become effective.
The
deposit agreement cannot be amended to prevent you from withdrawing the ordinary
shares represented by your ADSs.
We
have
the right to direct the depositary bank to terminate the deposit agreement.
Similarly, the depositary bank may in certain circumstances on its own
initiative terminate the deposit agreement. In either case, the depositary
bank
must give notice to the holders at least 30 days before
termination.
Upon
termination, the following will occur under the deposit agreement:
| · |
for
a period of six months after termination, you will be able to request
the
cancellation of your ADSs and the withdrawal of the ordinary shares
represented by your ADSs and the delivery of all other property held
by
the depositary bank in respect of those ordinary shares on the same
terms
as prior to the termination. During such six months’ period the depositary
bank will continue to collect all distributions received on the ordinary
shares on deposit ( i.e.,
dividends) but will not distribute any such property to you until
you
request the cancellation of your ADSs.
|
| · |
After
the expiration of such six-month period, the depositary bank may
sell the
securities held on deposit. The depositary bank will hold the proceeds
from such sale and any other funds then held for the holders of ADSs
in a
non-interest bearing account. At that point, the depositary bank
will have
no further obligations to holders other than to account for the funds
then
held for the holders of ADSs still
outstanding.
|
Books
of Depositary
The
depositary bank will maintain ADS holder records at its depositary office.
You
may inspect such records at such office at reasonable times, but solely for
the
purpose of communicating with other holders in the interest of business matters
of our company or relating to the ADSs or the deposit agreement.
The
depositary bank will maintain in New York City facilities to record and process
the execution, delivery, registration, transfer and surrender of ADRs. These
facilities may be closed from time to time when deemed expedient by the
depositary bank, or at our request.
Limitations
on Obligations and Liabilities
The
deposit agreement limits our obligations and the depositary bank’s obligations
to you. Please note the following:
| · |
We
and the depositary bank are obligated only to use our best judgment
and
good faith in performing the duties specifically stated in the deposit
agreement without negligence or bad faith.
|
| · |
The
depositary bank disclaims any liability for any failure to carry
out
voting instructions, for any manner in which a vote is cast or for
the
effect of any vote, provided it acts in good faith.
|
| · |
We
and the depositary bank will not be obligated to appear in, prosecute
or
defend any lawsuit or other proceeding unless satisfactory indemnity
is
provided against all expenses and liabilities.
|
| · |
We
and the depositary bank disclaim any liability for any action or
inaction
in reliance on the advice or information received from legal counsel,
accountants, any person presenting ordinary shares for deposit, any
holder
of ADRs, or any other person believed by either of us in good faith
to be
competent to give such advice or
information.
|
-37-
Pre-Release
Transactions
The
depositary bank may, in certain circumstances, issue ADSs before receiving
a
deposit of ordinary shares or release ordinary shares before receiving ADSs.
These transactions are commonly referred to as “pre-release transactions.” The
deposit agreement limits the aggregate size of pre-release transactions and
imposes a number of conditions on such transactions, including the need to
receive collateral, the type of collateral required, the representations
required from brokers, etc. The depositary bank may retain the compensation
received from the pre-release transactions.
Taxes
You
will
be responsible for the taxes and other governmental charges payable on the
ADSs
and the securities represented by the ADSs. We, the depositary bank and the
custodian may deduct from any distribution the taxes and governmental charges
payable by holders and may sell any and all property on deposit to pay the
taxes
and governmental charges payable by holders. You will be liable for any
deficiency if the sale proceeds do not cover the taxes that are
due.
The
depositary bank may refuse to issue ADSs, to deliver, transfer, split and
combine ADRs or to release securities on deposit until all taxes and charges
are
paid by the applicable holder. The depositary bank and the custodian may take
reasonable administrative actions to obtain tax refunds and reduced tax
withholding for any distributions on your behalf. However, you may be required
to provide to the depositary bank and to the custodian proof of taxpayer status
and residence and such other information as the depositary bank and the
custodian may require to fulfill legal obligations. You are required to
indemnify us, the depositary bank and the custodian for any claims with respect
to taxes based on any tax benefit obtained for you.
Foreign
Currency Conversion
The
depositary bank will arrange for the conversion of all foreign currency received
into U.S. dollars if in its judgment conversion can be made on a reasonable
basis. The depositary bank will distribute the U.S. dollars in accordance with
the terms of the deposit agreement. You may have to pay fees and expenses
incurred in converting foreign currency, such as fees and expenses incurred
in
complying with currency exchange controls and other governmental
requirements.
If
the
depositary bank determines that the foreign currency is not convertible on
a
reasonable basis, or if any required approvals are not obtainable or are not
obtained within a reasonable period, the depositary bank may take the following
actions in its discretion:
| · |
Convert
the foreign currency to the extent practical and lawful and distribute
the
U.S. dollars to the holders for whom the conversion and distribution
is
lawful and practical.
|
| · |
Distribute
the foreign currency to holders for whom the distribution is lawful
and
practical.
|
| · |
Hold
the foreign currency for the applicable holders without liability
for
interest.
|
We
will
pay the following estimated expenses and fees (not including underwriting
discounts and commissions and expenses reimbursed by us) in connection with
the
issuance and distribution of the shares offered by this prospectus. Other than
the SEC registration fee, all of these expenses are estimated.
-38-
The
following table sets forth the estimated expenses payable by us in connection
with the offering described in this prospectus. All amounts are subject to
future contingencies other than the SEC registration fee.
|
$
|
||||
|
Securities
and Exchange Commission Registration Fee
|
5,885
|
|||
|
Printing
and Engraving Expenses
|
6,000
|
|||
|
Legal
Fees and Expenses
|
40,000
|
|||
|
Accounting
Fees and Expenses
|
40,000
|
|||
|
Blue
Sky Qualification Fees and Expenses
|
10,000
|
|||
|
Miscellaneous
|
50,000
|
|||
|
Total
|
$
|
151,885
|
||
This
prospectus contains financial information relating to our acquisition of Laxdale
Limited. This financial information includes audited statements of Laxdale
Limited for each of the fiscal years ended March 31, 2004 and
March 31, 2003 and unaudited pro forma combined condensed financial
information of the Company reflecting the acquisition. See pages F-1 to F-33
at
the end of this prospectus. Unaudited financial statements of Laxdale for the
six months ended September 30, 2004 are contained in our Form 6-K dated
February 7, 2005 which is incorporated by reference herein.
Our
Annual Report on Form 20-F for the fiscal year ended December 31,
2003, including Amendment No. 1 and Amendment No. 2 thereto, is
incorporated by reference herein. Audited financial statements for the years
ended December 31, 2003, December 31, 2002 and December 31, 2001
are contained in such annual report. Unaudited financial statements for the
six
months ended June 30, 2004 are contained in our Form 6-K dated
September 30, 2004, which is incorporated by reference herein. Unaudited
financial statements for the nine months ended September 30, 2004 are
contained in our Form 6-K dated November 11, 2004, which is
incorporated by reference herein.
The
consolidated financial statements as of and for the years ended
December 31, 2003, December 31, 2002 and December 31, 2001, all
of which are incorporated by reference in this prospectus from our Annual Report
on Form 20-F for the year ended December 31, 2003 as amended, have
been incorporated in reliance on the report (which contains an emphasis of
matter paragraph relating to the Company’s ability to continue as a going
concern as described in note 1 to the financial statements) of
PricewaterhouseCoopers LLP, independent registered public accounting firm,
given
on the authority of said firm as experts in auditing and
accounting.
With
respect to the unaudited financial information of Amarin Corporation plc for
the
six-month periods ended June 30, 2004 and 2003, incorporated by reference
in this Prospectus, PricewaterhouseCoopers LLP reported that they have applied
limited procedures in accordance with professional standards for a review of
such information. However, their separate report dated September 30, 2004
incorporated by reference herein, states that they did not audit and they do
not
express an opinion on that unaudited financial information. Accordingly, the
degree of reliance on their report on such information should be restricted
in
light of the limited nature of the review procedures applied.
PricewaterhouseCoopers LLP is not subject to the liability provisions of
Section 11 of the Securities Act of 1933 for their report on the unaudited
financial information because that report is not a “report” or a “part” of the
registration statement prepared or certified by PricewaterhouseCoopers LLP
within the meaning of Sections 7 and 11 of the Act.
-39-
The
financial statements of Laxdale Limited at and for the years ended
March 31, 2004 and 2003 appearing in this prospectus and registration
statement have been audited by Ernst & Young LLP, independent auditors,
as set forth in their report thereon (which contains an explanatory paragraph
describing conditions that raise substantial doubt about Laxdale’s ability to
continue as a going concern as described in Note 1 to the Laxdale financial
statements) appearing elsewhere herein, and are included in reliance upon such
report given upon the authority of such firm as experts in accounting and
auditing.
With
respect to the unaudited condensed interim financial information of Laxdale
Limited for the six-month periods ended September 30, 2004 and
September 30, 2003, incorporated by reference in this Prospectus,
Ernst & Young LLP reported that they have applied limited procedures in
accordance with professional standards for a review of such information.
However, their separate report dated February 7, 2005, included in Amarin
Corporation plc’s Current Report on Form 6-K dated February 7, 2005, and
incorporated by reference herein, states that they did not audit and they do
not
express an opinion on that interim financial information. Accordingly, the
degree of reliance on their report on such information should be restricted
in
light of the limited nature of the review procedures applied. Ernst &
Young LLP is not subject to the liability provisions of Section 11 of the
Securities Act of 1933 (the “Act”) for their report on the unaudited interim
financial information because that report is not a “report” or a “part” of the
Registration Statement prepared or certified by Ernst & Young LLP
within the meaning of Sections 7 and 11 of the Act.
Certain
legal matters in connection with the ordinary shares offered hereby are being
passed upon for us by Kirkpatrick & Lockhart Nicholson Graham LLP, our
English legal advisors. We are being represented as to matters of U.S. law
by
Ziegler, Ziegler & Associates LLP, New York, New York, U.S. counsel to
the Company. Scott A. Ziegler, a partner of Ziegler, Ziegler &
Associates LLP, currently holds 105,096 of our ordinary shares. The
underwriters’ own legal counsel will advise them about other issues relating to
any offering.
INDEMNIFICATION
FOR SECURITIES ACT LIABILITIES
As
described in the registration statement of which this prospectus forms a part,
our articles of association and certain provisions of English law contain
provisions relating to the ability of our officers and directors to be
indemnified by us for costs, charges, expenses, losses and other liabilities
which are sustained or incurred in the performance of the officer’s or
director’s duties for us. Insofar as indemnification for liabilities arising
under the Securities Act may be permitted to our directors, officers and
controlling persons pursuant to the charter provision, by-law, contract,
arrangements, statute or otherwise, we have been advised that in the opinion
of
the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore,
unenforceable.
-40-
REPORT
OF INDEPENDENT AUDITORS
To
the
Board of Directors
Laxdale
Limited
We
have
audited the accompanying balance sheets of Laxdale Limited as of March 31,
2004 and 2003, and the related profit and loss accounts and statements of total
recognized gains and losses and cash flows for each of the two years in the
period ended March 31, 2004. These financial statements are the
responsibility of the Company’s management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We
conducted our audits in accordance with United Kingdom auditing standards and
United States generally accepted auditing standards. Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An audit includes
consideration of internal control over financial reporting as a basis for
designing audit procedures that are appropriate in the circumstances, but not
for the purpose of expressing an opinion on the effectiveness of the Company’s
internal control over financial reporting. Accordingly, we express no such
opinion. An audit also includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In
our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of the Laxdale Limited as at
March 31, 2004 and 2003, and the results of its operations and its cash
flows for each of the two years in the period ended March 31, 2004, in
conformity with accounting principles generally accepted in the United Kingdom
which differ in certain respects from those generally accepted in the United
States (see Note 23 of Notes to the Financial Statements).
The
accompanying financial statements have been prepared assuming that the Company
will continue as a going concern. As discussed in Note 1 to the financial
statements the Company is reliant upon sufficient funding continuing to be
available from the Company’s parent company, Amarin Corporation plc, to meet
ongoing working capital requirements. This in turn is dependent upon Amarin
obtaining additional funding. These conditions raise substantial doubt about
the
Company’s ability to continue as a going concern. Management’s plans in regard
to these matters are also described in Note 1. The financial statements do
not include any adjustments that might result from the outcome of this
uncertainty.
Ernst &
Young LLP
Glasgow,
Scotland
December 17,
2004
Laxdale
Limited
PROFIT
AND LOSS ACCOUNTS
For
the years ended 31 March 2004 and 2003
|
Notes
|
2004
£
|
2003
£
|
||||||||
|
Turnover—Income
from licensing
|
3
|
1,790,890
|
1,557,203
|
|||||||
|
Administrative
expenses:
|
||||||||||
|
Research
& development
|
(1,785,984
|
)
|
(3,243,615
|
)
|
||||||
|
Other
operating costs
|
(1,826,004
|
)
|
(2,391,591
|
)
|
||||||
|
Total
administrative expenses
|
(3,611,988
|
)
|
(5,635,206
|
)
|
||||||
|
Operating
loss
|
4
|
(1,821,098
|
)
|
(4,078,003
|
)
|
|||||
|
Interest
received and similar income
|
11,560
|
89,546
|
||||||||
|
Interest
payable and similar charges
|
7
|
(483
|
)
|
—
|
||||||
|
Loss
on ordinary activities before tax
|
(1,810,021
|
)
|
(3,988,457
|
)
|
||||||
|
Taxation
|
8
|
233,780
|
576,972
|
|||||||
|
Retained
loss for the year(1)
|
15
|
(1,576,241
|
)
|
(3,411,485
|
)
|
|||||
|
(1)
|
A
summary of the adjustments to loss for the year that would be required
if
United States generally accepted accounting principles were to be
applied
instead of those generally accepted in the United Kingdom is set
out in
Note 23 to the financial
statements.
|
F-2
Laxdale
Limited
STATEMENTS
OF TOTAL RECOGNISED GAINS AND LOSSES
For
the years ended 31 March 2004 and 2003
There
were no recognised gains and losses other than the loss of £1,576,241 for the
year to 31 March 2004 (2003—loss of £3,411,485)
The
statement of comprehensive income required under United States generally
accepted accounting principles is set out in Note 23 to the financial
statements.
F-3
Laxdale
Limited
BALANCE
SHEETS
As
at 31 March 2004 and 2003
|
Notes
|
2004
£
|
2003
£
|
||||||||
|
Tangible
Fixed Assets
|
9
|
|||||||||
|
Fixture
and fittings
|
129,537
|
153,351
|
||||||||
|
Office
equipment
|
12,203
|
29,738
|
||||||||
|
141,740
|
183,089
|
|||||||||
|
Current
Assets
|
||||||||||
|
Stock
|
10
|
—
|
60,522
|
|||||||
|
Debtors
|
11
|
524,601
|
989,201
|
|||||||
|
Investments
|
12
|
158,171
|
324,256
|
|||||||
|
Cash
at bank and in hand
|
149
|
886,517
|
||||||||
|
682,921
|
2,260,496
|
|||||||||
|
Creditors:
Amounts due within one year
|
13
|
(819,103
|
)
|
(861,786
|
)
|
|||||
|
Net
current(liabilities)/assets
|
(136,182
|
)
|
1,398,710
|
|||||||
|
Total
Assets less Current Liabilities
|
5,558
|
1,581,799
|
||||||||
|
Capital
and Reserves
|
||||||||||
|
Called
up share capital
|
14
|
4,000,000
|
4,000,000
|
|||||||
|
Share
premium account
|
15
|
5,000,000
|
5,000,000
|
|||||||
|
Profit
and loss account
|
15
|
(8,994,442
|
)
|
(7,418,201
|
)
|
|||||
|
Equity
shareholders’ funds(1)
|
15
|
5,558
|
1,581,799
|
|||||||
|
(1)
|
A
summary of the significant adjustments to equity shareholders’ funds that
would be required if United States generally accepted accounting
principles were to be applied instead of those generally accepted
in the
United Kingdom is set out in Note 23 to the financial
statements.
|
F-4
Laxdale
Limited
STATEMENTS
OF CASH FLOWS
For
the years ended 31 March 2004 and 2003
|
Notes
|
2004
£
|
2003
£
|
||||||||
|
Net
cash outflow from operating activities
|
16(a
|
)
|
(1,535,273
|
)
|
(4,012,519
|
)
|
||||
|
Returns
on investments and servicing of finance:
|
||||||||||
|
Interest
received
|
11,560
|
96,779
|
||||||||
|
Interest
paid
|
(483
|
)
|
—
|
|||||||
|
11,077
|
96,779
|
|||||||||
|
Taxation:
|
||||||||||
|
Corporation
tax paid
|
—
|
(269
|
)
|
|||||||
|
Corporation
tax received
|
445,550
|
—
|
||||||||
|
445,550
|
(269
|
)
|
||||||||
|
Capital
expenditure and financial investment:
|
||||||||||
|
Payment
to acquire tangible fixed assets
|
—
|
(19,265
|
)
|
|||||||
|
|
—
|
(19,265
|
)
|
|||||||
|
Decrease
in cash
|
16(b
|
)
|
(1,078,646
|
)
|
(3,935,274
|
)
|
||||
|
Reconciliation
of net cash flow to movement in net (debt)/funds:
|
||||||||||
|
Decrease
in cash
|
(1,078,646
|
)
|
(3,935,274
|
)
|
||||||
|
Movement
in net debt
|
(1,078,646
|
)
|
(3,935,274
|
)
|
||||||
|
Net
funds at 1 April
|
16(b
|
)
|
886,517
|
4,821,791
|
||||||
|
Net
(debt)/funds at 31 March
|
16(b
|
)
|
(192,129
|
)
|
886,517
|
|||||
The
significant differences between the cash flow statements above and those
required under United States generally accepted accounting principles were
to be
applied instead of those generally accepted in the United Kingdom is set out
in
Note 23 to the financial statements.
F-5
Laxdale
Limited
NOTES
TO THE FINANCIAL STATEMENTS
1. Basis
of preparing the financial statements
As
disclosed in note 22, the company was acquired by Amarin Corporation plc
(“Amarin”) on 8 October 2004. Amarin has provided confirmation to the
directors of the company that it will provide sufficient financial support
to
allow the company to continue in operational existence for the foreseeable
future and to meet its liabilities as they fall due. The ability of Amarin
to
provide adequate financial support depends on its ability to raise additional
funding.
On
the
basis of forecasted cash flow information for the combined business, Amarin
has
sufficient cash to fund the group’s operating activities, including the planned
phase III trials for Miraxion in Huntington’s disease, through the summer of
2005. Amarin intends to obtain additional funding through earning license fees
from partnering its drug development pipeline and/or completing further
equity-based financings in the forthcoming year. There is no assurance that
Amarin’s efforts to raise additional funding will be successful. If efforts are
unsuccessful, there is uncertainty as to whether Amarin will be able to fund
the
combined business on an ongoing basis.
Whilst
the directors are presently uncertain as to the outcome of the matters mentioned
above, they believe that sufficient funding will be made available to the
company by Amarin to meet its ongoing working capital requirements. Accordingly,
the directors of the company believe it is appropriate to prepare the financial
statements on a going concern basis. The financial statements do not include
any
adjustments that would result if such financial support did not continue to
be
available.
These
financial statements do not comprise the company’s statutory accounts within the
meaning of section 240 of the Companies Act 1985 of Great Britain.
Statutory accounts for the years ended 31 March 2004 and 2003 on which the
auditors’ reports were unqualified, have been delivered to the Registrar of
Companies for Scotland.
2. Accounting
Policies
Accounting
Convention
The
financial statements are prepared under the historical cost convention and
in
accordance with applicable United Kingdom accounting standards.
Fixed
Assets
All
tangible fixed assets are recorded at cost.
Depreciation
Depreciation
is provided on all tangible fixed assets at rates calculated to write off the
cost of each asset evenly over its expected useful life, as
follows:
|
Fixtures,
Fittings and Furniture
|
|
—10%
|
|||
|
Computer
Equipment
|
|
—33⅓%
|
|||
|
Motor
Vehicles
|
|
—25%
|
Income
from licensing
Licensing
fees represent revenues derived from licensing agreements. Licensing fees are
recognised upon transfer or licensing of the right to use intellectual property
rights in different geographic areas. Where licensing agreements stipulate
payment on a milestone basis, revenue is recognised upon
F-6
achievement
of those milestones. Revenues are stated net of value added tax and similar
taxes. No revenue is recognised for consideration, the receipt of which is
dependent on future events, future performance or refund
obligations.
Stocks
The
cost
of medical trial stocks are written off as research and development
costs
Goods
for
resale are stated at the lower of cost and net realisable value. Cost includes
all costs incurred in bringing each product to its present location and
condition. Net realisable value is based on the price at which stocks can be
sold in the normal course of business less any further costs expected to be
incurred to completion and disposal.
Current
asset investments
Current
asset investments are stated at the lower of original cost and net realisable
value.
Deferred
taxation
Deferred
tax is recognised in respect of all timing differences that have originated
but
not reversed at the balance sheet date where transactions or events have
occurred at that date that will result in an obligation to pay more, or a right
to pay less or to receive more, tax, with the following exceptions:
| · |
provision
is made for tax on gains arising from the revaluation (and similar
fair
value adjustments) of fixed assets, and gains on disposal of fixed
assets
that have been rolled over into replacement assets, only to the extent
that, at the balance sheet date, there is a binding agreement to
dispose
of the assets concerned. However, no provision is made where, on
the basis
of all available evidence at the balance sheet date, it is more likely
than not that the taxable gain will be rolled over into replacement
assets
and charged to tax only where the replacement assets are
sold;
|
| · |
deferred
tax assets are recognized only to the extent that the directors consider
that it is more likely than not that there will be suitable taxable
profits from which the future reversal of the underlying timing
differences can be deducted.
|
Pensions
The
company operates a defined contribution scheme. Contributions are charged to
the
profit and loss account as they become payable in accordance with the rules
of
the scheme.
Foreign
Currency
Transactions
in foreign currencies are recorded at the rate ruling at the date of the
transaction. Monetary assets and liabilities denominated in foreign currencies
are retranslated at the rate of exchange ruling at the balance sheet date.
All
differences are taken to the profit and loss account.
Research
and Development
Research
and development is written off in the period in which it is
incurred.
Research
and development tax credits
Credit
is
taken in the accounting period for research and development tax credits, which
are claimed from the Inland Revenue, in respect of qualifying research and
development costs incurred in the same accounting period.
F-7
Leasing
Rentals
payable under operating leases are charged in the profit and loss account on
a
straight-line basis over the lease term.
3. Turnover—Income
from licensing
Income
from licensing was from licensing partners in the EU and Japan. An analysis
of
income from licencing by geographical market is given below.
|
2004
£
|
2003
£
|
||||||
|
EU
|
1,155,731
|
1,557,203
|
|||||
|
Japan
|
635,158
|
—
|
|||||
|
1,790,889
|
1,557,203
|
||||||
4. Operating
Loss
This
is
stated after charging:
|
2004
£
|
2003
£
|
||||||
|
Depreciation
of owned fixed assets
|
41,349
|
41,857
|
|||||
|
Auditors’
remuneration—audit services
|
11,500
|
10,800
|
|||||
|
—non
audit services
|
56,270
|
131,645
|
|||||
|
Operating
lease rentals:
|
|||||||
|
—Land
& buildings
|
141,550
|
141,550
|
|||||
|
—Plant
& equipment
|
43,506
|
50,887
|
|||||
|
Foreign
exchange differences
|
95,940
|
3,547
|
|||||
|
Write
down of current asset investments
|
166,085
|
335,112
|
|||||
5. Directors’
Emoluments
|
2004
£
|
2003
£
|
||||||
|
Emoluments
|
193,328
|
507,579
|
|||||
|
Company
contributions paid to money purchase schemes
|
24,380
|
53,460
|
|||||
|
Members
of money purchase schemes
|
2
|
2
|
|||||
|
The
amounts in respect of the highest paid director are as follows:
|
|||||||
|
Emoluments
|
149,969
|
338,613
|
|||||
|
Company
contributions paid to money purchase schemes
|
24,300
|
29,160
|
|||||
F-8
6. Staff
costs
|
2004
£
|
2003
£
|
||||||
|
Wages
and salaries
|
847,380
|
1,012,025
|
|||||
|
Social
security costs
|
101,394
|
115,398
|
|||||
|
Other
Pension costs
|
83,025
|
106,215
|
|||||
|
1,031,799
|
1,233,638
|
||||||
The
monthly average number of employees during the year was as follows:
|
2004
No.
|
2003
No.
|
||||||
|
Research
and development
|
12
|
13
|
|||||
|
Administration
and commercial
|
6
|
6
|
|||||
|
18
|
19
|
||||||
7. Interest
payable and similar charges
|
2004
£
|
2003
£
|
||||||
|
Bank
overdraft
|
483
|
—
|
|||||
8. Taxation
|
2004
£
|
2003
£
|
||||||
|
UK
corporation tax on losses in the year
|
(301,000
|
)
|
(493,129
|
)
|
|||
|
Adjustment
in respect of previous years
|
3,704
|
(83,843
|
)
|
||||
|
UK
current tax
|
(297,296
|
)
|
(576,972
|
)
|
|||
|
Foreign
tax
|
63,516
|
—
|
|||||
|
(233,780
|
)
|
(576,972
|
)
|
||||
The
company has tax losses carried forward at 31 March 2004 of £6.9m
(2003-£6.1m).
F-9
The
tax
assessed on the loss on ordinary activities for the year is lower than the
standard rate of corporation tax in the UK of 30% (2003 - 30%). The
differences are reconciled below:
|
£
|
£
|
||||||
|
Loss
on ordinary activities before taxation
|
(1,810,021
|
)
|
(3,988,457
|
)
|
|||
|
Tax
on loss on ordinary activities at 30%
|
(543,006
|
)
|
(1,196,537
|
)
|
|||
|
Effects
of:
|
|||||||
|
Disallowed
expenses
|
64,248
|
6,050
|
|||||
|
Capital
allowances in excess of depreciation
|
162
|
(7,234
|
)
|
||||
|
Other
timing differences
|
(715
|
)
|
(1,429
|
)
|
|||
|
Unutilised
losses carried forward
|
115,196
|
625,797
|
|||||
|
Research
and development tax relief
|
76,634
|
80,224
|
|||||
|
Adjustment
in respect of previous years
|
49,997
|
—
|
|||||
|
Overseas
tax suffered
|
(233,780
|
)
|
(576,972
|
)
|
|||
9. Tangible
fixed assets
|
Fittings
£
|
Office
Equipment
£
|
Motor
Vehicles
£
|
Total
£
|
||||||||||
|
Cost
|
|||||||||||||
|
At
1 April 2002
|
232,989
|
103,653
|
9,947
|
346,589
|
|||||||||
|
Additions
|
5,160
|
14,105
|
—
|
19,265
|
|||||||||
|
At
31 March 2003
|
238,149
|
117,758
|
9,947
|
365,854
|
|||||||||
|
Depreciation
|
|||||||||||||
|
At
1 April 2002
|
61,187
|
69,774
|
9,947
|
140,908
|
|||||||||
|
Provided
during year
|
23,611
|
18,246
|
—
|
41,857
|
|||||||||
|
At
31 March 2003
|
84,798
|
88,020
|
9,947
|
182,765
|
|||||||||
|
Net
Book Value
|
|||||||||||||
|
At
1 April 2002
|
171,802
|
33,879
|
—
|
205,681
|
|||||||||
|
At
31 March 2003
|
153,351
|
29,738
|
—
|
183,089
|
|||||||||
|
Cost
|
|||||||||||||
|
At
1 April 2003 and 31 March 2004
|
238,149
|
117,758
|
9,947
|
365,854
|
|||||||||
|
Depreciation
|
|||||||||||||
|
At
1 April 2003
|
84,798
|
88,020
|
9,947
|
182,765
|
|||||||||
|
Provided
during year
|
23,814
|
17,535
|
—
|
41,349
|
|||||||||
|
At
31 March 2004
|
108,612
|
105,555
|
9,947
|
224,114
|
|||||||||
|
Net
Book Value
|
|||||||||||||
|
At
1 April 2003
|
153,351
|
29,738
|
—
|
183,089
|
|||||||||
|
At
31 March 2004
|
129,537
|
12,203
|
—
|
141,740
|
|||||||||
F-10
|
2004
£
|
2003
£
|
||||||
|
Goods
for Resale
|
—
|
60,522
|
|||||
11. Debtors
|
2004
£
|
2003
£
|
||||||
|
Trade
debtors
|
—
|
275,925
|
|||||
|
Corporation
tax
|
428,987
|
577,241
|
|||||
|
Other
debtors
|
42,441
|
90,332
|
|||||
|
Prepayments
and accrued income
|
53,173
|
45,703
|
|||||
|
524,601
|
989,201
|
||||||
12. Investments
|
2004
£
|
2003
£
|
||||||
|
Listed
investments
|
158,171
|
324,256
|
|||||
The
listed investments are American Deposit Receipts in Amarin Corporation plc.
As
disclosed in note 22 on 8 October 2004 the sale of Laxdale Limited to
Amarin Corporation plc was completed.
The
market value of listed investments at 31 March 2004 was £158,171
(2003 - £324,256).
13. Creditors:
Amounts falling due within one year
|
2004
£
|
2003
£
|
||||||
|
Bank
overdraft
|
192,278
|
—
|
|||||
|
Trade
creditors
|
248,732
|
209,764
|
|||||
|
Other
taxes and social security costs
|
29,550
|
41,556
|
|||||
|
Other
creditors
|
9,591
|
12,609
|
|||||
|
Accruals
and deferred income
|
338,952
|
597,857
|
|||||
|
819,103
|
861,786
|
||||||
The
bank
overdraft is secured by a floating charge over the company’s
assets.
14. Share
Capital
|
2004
£
|
2003
£
|
||||||
|
Authorised
|
|||||||
|
Ordinary
Shares of £1 each
|
10,000,000
|
10,000,000
|
|||||
F-11
|
2004
No.
|
2003
£
|
2003
No.
|
2003
£
|
||||||||||
|
Allotted,
called up and fully paid
|
|||||||||||||
|
Ordinary
Shares of £1 each
|
4,000,000
|
4,000,000
|
4,000,000
|
4,000,000
|
|||||||||
There
were no changes to the share capital during either year.
At
the
balance sheet date there were options outstanding under the Laxdale Limited
Unapproved Share Option Scheme over 124,800 ordinary shares at an exercise
price
of £1 (2003 - 127,300). Options over 34,500 ordinary shares are
exercisable between October 2005 and October 2010 or earlier in the
event of a change of control of the company. Options over 90,300 ordinary shares
are exercisable from June 2007 to June 2012 or earlier in the event of
a change of control of the company.
At
the
balance sheet date options under the Laxdale Limited 1998 Unapproved Share
Option Scheme were outstanding over 6,000 ordinary shares at an exercise price
of £1 each (2003 - 7,000). These options are exercisable between
February 2004 and February 2009 or earlier in the event of a flotation
or change in control of the company.
15. Reconciliation
of shareholders’ funds and movement on reserves
|
Share
Capital£
|
Share
Premium
£
|
Profit
and
Loss
Account
£
|
Total
Shareholders’
funds
£
|
||||||||||
|
At
1 April 2002
|
4,000,000
|
5,000,000
|
(4,006,716
|
)
|
4,993,284
|
||||||||
|
Loss
for the year to 31 March 2003
|
—
|
—
|
(3,411,485
|
)
|
(3,411,485
|
)
|
|||||||
|
At
31 March 2003 and 1 April 2003
|
4,000,000
|
5,000,000
|
(7,418,201
|
)
|
1,581,799
|
||||||||
|
Loss
for the year to 31 March 2004
|
—
|
—
|
(1,576,241
|
)
|
(1,576,241
|
)
|
|||||||
|
At
31 March 2004
|
4,000,000
|
5,000,000
|
(8,994,442
|
)
|
5,558
|
||||||||
16. Notes
to the statement of cash flows
(a) Reconciliation
of operating loss to net cash outflow from operating activities
|
2004
£
|
2003
£
|
||||||
|
Operating
loss
|
(1,821,098
|
)
|
(4,078,003
|
)
|
|||
|
Depreciation
|
41,349
|
41,857
|
|||||
|
Decrease/(increase)
in stock
|
60,522
|
(14,157
|
)
|
||||
|
Decrease/(increase)
in debtors
|
316,346
|
(277,741
|
)
|
||||
|
Decrease
in creditors
|
(234,961
|
)
|
(19,587
|
)
|
|||
|
Write
down of current asset investments
|
166,085
|
335,112
|
|||||
|
Foreign
tax unrecoverable
|
(63,516
|
)
|
—
|
||||
|
Net
cash outflow from operating activities
|
(1,535,273
|
)
|
(4,012,519
|
)
|
|||
F-12
(b) Analysis
of net funds/(debt)
|
At
1
April 2002
£
|
Cash
flow
£
|
At
31
March 2003
£
|
||||||||
|
Cash
at bank and in hand
|
4,821,791
|
3,935,274
|
886,517
|
|||||||
|
4,821,791
|
3,935,274
|
886,517
|
||||||||
|
|
At
1
April 2003
£
|
Cash
flow
£
|
At
31
March 2004
£
|
|||||||
|
Cash
at bank and in hand
|
886,517
|
(886,368
|
)
|
149
|
||||||
|
Bank
overdraft
|
—
|
(192,278
|
)
|
(192,278
|
||||||
|
886,517
|
(1,078,646
|
)
|
(192,129
|
)
|
||||||
17. Deferred
taxation
The
company has a deferred taxation asset not provided for in the financial
statements of £2,076,649 (2003 - £1,850,922).
18. Pension
Commitments
The
company operates a defined contribution pension scheme, the Laxdale Group
Personal Pension Plan for its employees. The assets of the scheme are held
separately from the company and are held as policies in the names of the
individual employees. During the year contributions payable amounted to £83,025
(2003 - £106,215). The unpaid contributions outstanding at the year
end amounted to £9,591 (2003 - £12,609).
19. Other
Financial Commitments
At
31
March 2004 the company had annual commitments under non-cancellable
operating leases as set out below:
|
2004
£
|
2003
£
|
||||||
|
Land
& Buildings operating leases which expire:
|
|||||||
|
In
over five years
|
141,550
|
141,550
|
|||||
|
Other
operating leases which expire:
|
|||||||
|
Within
one year
|
10,484
|
8,576
|
|||||
|
In
two to five years
|
19,851
|
34,011
|
|||||
20. Related
Parties
Laxdale Ltd
has a licence agreement with Scarista Ltd whereby rights to develop
products using Scarista’s intellectual property and know-how has been licensed
to Laxdale Ltd. Scarista Ltd is ultimately owned by a family trust,
the beneficiaries of which was Dr D F Horrobin and is S M Clarkson. Dr D F
Horrobin was a director of Laxdale Limited until his death on 1 April 2003
and SM Clarkson was a director of Laxdale until she resigned on 8
October 2004. Under the licence agreement Laxdale has the right to develop
and market products in specified territories. In return for the rights granted
to it, Laxdale will make royalty payments to Scarista Ltd based on income
from sales of products at normal commercial rates. In addition Scarista has
a
license agreement with Laxdale Ltd whereby rights to market and sell
products using Laxdale’s intellectual property and know how have been licensed
to Scarista Ltd. Under the license agreement Scarista has the right to
market products in
F-13
21. Parent
Undertaking and Controlling Party
Prior
to
the sale of the company’s shares to Amarin Corporation plc as noted in
note 22 below, the company’s immediate parent undertaking was Belsay
Limited, a company incorporated in the Isle of Man and the company’s ultimate
parent undertaking and controlling party was the Stirling Trust.
As
at 31
March 2003 Dr D F Horrobin and S M Clarkson were beneficiaries of the
Stirling Trust. At 31 March 2004 S M Clarkson was the beneficiary of the
Stirling Trust.
22. Post
Balance Sheet Events
On
4
June 2004 Laxdale Ltd entered into a loan agreement with Amarin Corporation
plc which provided for a loan amount of up to £500,000. In the period up to 8
October 2004 Laxdale Limited drew funds from Amarin Corporation plc of
approximately £lm. The provision of the loan was contingent upon continued
negotiations of the sale of Laxdale to Amarin.
On
9 July 2004 Laxdale’s shareholders signed a definitive agreement with
Amarin Corporation plc to sell their shares in Laxdale to Amarin. Completion
of
the sale of Laxdale’s shares was contingent upon Amarin receiving shareholder
approval, completion by Amarin of a US$15 million financing, Amarin not
having received a delisting notice and other customary conditions. The agreement
provided for the extension of the loan to Laxdale from Amarin. On
28 September 2004 the transaction was approved by Amarin’s shareholders. On
8 October 2004 Amarin completed a private equity placement which raised
$12.75 million. As allowed under the agreement Amarin waived the minimum
financing condition and the sale of the company to Amarin was completed on
that
date. From that date the ultimate controlling party of the company is Amarin
Corporation plc.
F-14
23. United
States Generally Accepted Accounting Principles (“US
GAAP”)
Reconciliation
of net loss
|
2004
£
|
2003
£
|
||||||
|
Loss
on ordinary activities after taxation UK-GAAP
|
(1,576,241
|
)
|
(3,411,485
|
)
|
|||
|
(a)
Revenue recognition
|
(1,452,569
|
)
|
(1,396,546
|
)
|
|||
|
(b)
Vacation pay accrual
|
(4,267
|
)
|
(9,041
|
)
|
|||
|
Net
loss and comprehensive net loss as adjusted to accord with
US-GAAP
|
(3,033,077
|
)
|
(4,817,072
|
)
|
|||
|
Reconciliation
of shareholders funds
|
|||||||
|
Equity
shareholders’ funds in accordance with UK GAAP
|
5,558
|
1,581,799
|
|||||
|
(a)
Deferred revenue
|
(5,413,140
|
)
|
(3,960,571
|
)
|
|||
|
(b)
Creditors—amounts falling due within on year—accruals
|
(22,780
|
)
|
(18,513
|
)
|
|||
|
Shareholders’
equity (deficit) in accordance with US-GAAP
|
(5,430,362
|
)
|
(2,397,285
|
)
|
|||
(a) Revenue
recognition
Under
UK
GAAP, non-refundable licensing revenue in the form of milestone payments is
recognised upon transfer or licensing of intellectual property rights. Where
licensing agreements stipulate payment on a milestone basis, revenue is
recognised upon achievement of those milestones. Revenues are stated net of
value added tax and similar taxes. No revenue is recognised for consideration,
the receipt of which is dependent on future events, future performance or refund
obligations.
Under
US
GAAP and in accordance with Staff Accounting Bulletin 101 “Revenue Recognition
in Financial Statements”, as updated by Staff Accounting Bulletin 104 “Revenue
Recognition” and Emerging Issues Task Force or EITF00-21 “Revenue Arrangements
with Multiple Deliverables”, revenue from licensing agreements would be
recognised based upon the performance requirements of the agreement.
Non-refundable fees where the company has an ongoing involvement or performance
obligation, would be recorded as deferred revenue in the balance sheet and
amortized into license fees in the profit and loss account over the estimated
term of the performance obligation.
The
company has received £6,197,010 in non-refundable milestone income under license
agreements with its licensing partners. Under the terms of the license
agreements it is the company’s responsibility to obtain approval of the licensed
product and in certain cases to supply the product to the licensee once the
product is approved. Under the terms of SABs 101 and 104 and EITF00-21, these
milestone fees would be deferred and amortized on a straight-line basis over
the
estimated life of the patent. This is considered by the company to be the term
of the performance obligations under each license agreement.
(b) Accrual
for vacation expense
The
company does not fully provide for vacation expense. To comply with US GAAP
this
expense would be fully provided for.
(c) Stock
Options
Under
UK
GAAP, if stock options are granted at their fair value, no charge is made to
the
profit and loss account. Under US GAAP the Company would apply APB Opinion
No.
25, “Accounting for Stock Issued to Employees” to account for its option plans.
For both periods presented no
F-15
compensation
charge for stock options has arisen under UK GAAP or would have arisen under
US
GAAP.
(d) Statement
of cash flows
In
accordance with UK GAAP, Laxdale Ltd complies with FRS No 1 “Cash Flow
Statements” (“FRS 1”). Its objective and principles are similar to those set out
in SFAS No 95, “Statement of Cash Flows” (“SFAS No. 95”) under US GAAP. The
principal difference between the standards is in respect of classification.
Under FRS 1, the company has presented its cash flows for (a) operating
activities; (b) returns on investments and servicing of finance;
(c) taxation; (d) capital expenditure and financial investment;
(e) acquisitions and disposals; and (f) financing activities. SFAS No.
95 requires only three categories of cash flow activity, (a) operating;
(b) investing; and (c) financing.
Cash
flows arising from taxation and returns on investments and servicing of finance
under UK GAAP would be included as operating activities under US GAAP. In
addition, under UK GAAP, cash and liquid resources include short-term borrowings
repayable on demand. US GAAP requires such movements on such borrowings to
be
included in financing activities. The company’s current account was in overdraft
as at 31 March 2004. This would be included as part of net cash outflows
from financing activities, as the overdraft was used to fund the company’s
short-term working capital requirements.
The
categories of cash flow activity under US GAAP can be summarised as
follows:
|
2004
£
|
2003
£
|
||||||
|
Net
cash outflow from operating activities
|
(1,078,646
|
)
|
(3,916,009
|
)
|
|||
|
Cash
outflow on investing activities
|
—
|
(19,265
|
)
|
||||
|
Cash
inflow from financing activities
|
192,278
|
—
|
|||||
|
Movement
in cash and cash equivalents
|
(886,368
|
)
|
(3,935,274
|
)
|
|||
|
Cash
and cash equivalents at beginning of year
|
886,517
|
4,821,791
|
|||||
|
Cash
and cash equivalents at the end of year
|
149
|
886,517
|
|||||
F-16
UNAUDITED
PRO FORMA COMBINED CONDENSED CONSOLIDATED FINANCIAL
INFORMATION
INTRODUCTORY
NOTE
On
October 8, 2004, Amarin Corporation plc (“Amarin”) declared its offer for
the shares of Laxdale Limited (now known as Amarin Neuroscience Limited) wholly
unconditional and acquired 100% of the outstanding Laxdale shares in a stock
acquisition (the “Acquisition”). As consideration for the acquisition of 100% of
the outstanding shares of Laxdale, Amarin issued 3.5 million of its
ordinary shares valued at approximately $3.8 million. Amarin also incurred
an estimated $0.8 million in transaction fees, including legal, due
diligence and accounting fees. The transaction has been accounted for as a
purchase business combination, and the net preliminary purchase price of
approximately $4.6 million has been allocated to the tangible and
identifiable intangible assets acquired and liabilities assumed on the basis
of
their estimated fair values on the acquisition date.
The
following unaudited pro forma combined condensed consolidated financial
information gives effect to the acquisition by Amarin of all of the outstanding
shares of Laxdale. The unaudited pro forma condensed combined balance sheet
is
based on the historical balance sheets of Amarin and Laxdale at June 30,
2004 and September 30, 2004 respectively, and has been prepared to reflect
the acquisition as if the acquisition of all of the outstanding shares of
Laxdale had been consummated on June 30, 2004. The unaudited pro forma
condensed combined statements of operations combine the results of operations
of
Amarin and Laxdale for the year ended December 31, 2003 and March 31,
2004, respectively, and the six months ended June 30, 2004 and
September 30, 2004 respectively, as if the acquisition had occurred on
January 1, 2003.
The
unaudited pro forma condensed combined financial information has been prepared
from, and should be read in conjunction with, the respective historical
consolidated financial statements of Amarin and Laxdale. Amarin’s historical
consolidated financial statements for the year ended and as of December 31,
2003 can be found in Amarin’s Annual Report on Form 20-F/A filed on
December 14, 2004 and Amarin’s historical unaudited condensed consolidated
financial statements for the six-months ended and as of June 30, 2004 were
furnished under cover of a Report on Form 6-K on September 30, 2004.
Laxdale’s historical financial statements for the year ended and as of
March 31, 2004 are included herein. Laxdale’s unaudited condensed financial
statements for the six months ended and as of September 30, 2004 were
furnished under cover of a Report on Form 6-K on February 7,
2005.
The
historical profit and loss account and balance sheet of Laxdale has been
prepared in accordance with UK GAAP. For the purpose of presenting the unaudited
pro forma condensed combined financial information, the profit and loss account
and balance sheet relating to Laxdale has been adjusted to conform with US
GAAP
as described in the notes to the unaudited pro forma condensed combined
financial information.
The
historical financial statements of Laxdale were presented in pounds sterling
(£). For the purposes of presenting the unaudited pro forma condensed combined
financial information, the adjusted income statements of Laxdale for the year
ended March 31, 2004 and six-month period ended September 30, 2004,
have been translated into US dollars at the average daily closing rate for
the
year ended March 31, 2004 and six-months ended September 30, 2004. The
adjusted balance sheet of Laxdale at September 30, 2004 has been translated
into US dollars at the closing rate on September 30, 2004.
Balance
sheet information presented for both Amarin and Laxdale has been updated for
material post balance sheet events. These events are separate from the
acquisition and are detailed in Table 1 and Table 2 to the unaudited
pro forma combined condensed consolidated balance sheet as at 30 June
2004.
The
preliminary pro forma acquisition adjustments described in the notes are based
on available information and certain assumptions made by Amarin management
and
may be revised as additional information becomes available. The unaudited pro
forma condensed combined financial information is not intended to represent
what
Amarin’s financial position is or results of operations would have been if the
acquisition had occurred on those dates or to project Amarin’s financial
position or results of operations for any future period. Since Amarin and
Laxdale were not under common control or management for any period presented,
the unaudited pro forma condensed combined financial results may not be
comparable to, or indicative of, future performance.
F-17
PRELIMINARY
PURCHASE PRICE
The
unaudited pro forma condensed combined consolidated financial information
reflect an estimated purchase price of approximately $4.6 million for 100%
of the outstanding shares of Laxdale. The fair value of the Amarin ordinary
shares issued of $1.08 was based on the closing market price of Amarin ADSs
on
October 8, 2004, the announcement date of the acquisition. The estimated
total purchase price for the acquisition of 100% of the outstanding shares
of
Laxdale is as follows (in thousands):
|
Fair
value of Amarin ordinary shares to be issued
|
3,780
|
|||
|
Estimated
direct acquisition costs
|
813
|
|||
|
Total
estimated purchase price
|
4,593
|
|||
The
final
purchase price is dependent on the actual number of shares of Amarin common
stock issued and actual direct acquisition costs, together with contingent
consideration which may become payable, in the future, on the achievement of
certain approval milestones. Approval of Laxdale’s key compound (Miraxion,
formerly known as LAX-101) in the treatment of Huntington’s disease, for
marketing in the US would result in Amarin paying the vendors of Laxdale an
additional £7.5 million in cash or shares. Approval for Huntington’s
disease by the European Agency for the Evaluation of Medical Products (EMEA)
would result in Amarin paying the vendors of Laxdale an additional
£7.5 million in cash or shares. The approval of the use of Miraxion in the
treatment of depression would result in Amarin paying the vendors of Laxdale
an
additional £5 million in cash or shares for US approval and £5 million
in cash or shares for EMEA approval. Under the purchase method of accounting,
the total estimated purchase price is allocated to Laxdale’s net tangible and
intangible assets based on their estimated fair value as of the date of
completion of the acquisition. Under US GAAP, FAS 141 Business Combinations
para 44, a deferred tax liability is recognized on the fair valuation of the
intangible assets arising on acquisition. Under UK GAAP a deferred tax liability
is not recognized. In the following tables and footnotes details are provided
of
the fair value exercise performed under UK and US GAAP and the differences
pertaining to deferred tax.
Unaudited
pro forma combined condensed consolidated income statement — for the combination
at 31 December 2003
Unaudited
pro forma combined condensed consolidated income statement information is
presented for the combination for the year to 31 December 2003. The below table
also indicates the reference accounts being year ended 31 December 2003 for
Amarin and year ended 31 March 2004 for Laxdale.
Laxdale’s
financial statements are prepared in sterling and have been converted into
US
dollars, for the purposes of this Unaudited pro forma combined condensed
consolidated information, using the average exchange rate for the year ended
31
March 2004.
F-18
Unaudited
pro forma combined condensed consolidated income statement — for the
combination at 31 December 2003
|
31
December
2003
Amarin
UK
GAAP
$’000
|
31
March
2004
Laxdale
UK
GAAP
$’000
|
Adjustments
on
combination
UK
GAAP
$’000
|
Combined
UK
GAAP
$’000
|
Amarin
Adjustments
between
UK
and
US
GAAP
$’000
|
Laxdale
Adjustments
between
UK
and
US
GAAP
$’000
|
Combination
Adjustments
between
UK
and
US
GAAP
$’000
|
Combined
US
GAAP
$’000
|
||||||||||||||||||
|
Note
1
|
Note
2
|
Note
3
|
Note
4
|
Note
5
|
Note
6
|
Note
7
|
Note
8
|
||||||||||||||||||
|
Reference
financial statements
|
|||||||||||||||||||||||||
|
Turnover
|
107
|
3,054
|
—
|
3,161
|
348
|
(2,477
|
)
|
—
|
1,032
|
||||||||||||||||
|
Cost
of sales
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
|||||||||||||||||
|
Gross
profit/(loss)
|
107
|
3,054
|
—
|
3,161
|
348
|
(2,477
|
)
|
—
|
1,032
|
||||||||||||||||
|
Operating
expenses/(income)
|
(6,200
|
)
|
(6,159
|
)
|
(108
|
)
|
(12,467
|
)
|
526
|
(7
|
)
|
108
|
(11,840
|
)
|
|||||||||||
|
Operating
(loss)/profit
|
(6,093
|
)
|
(3,105
|
)
|
(108
|
)
|
(9,306
|
)
|
874
|
(2,484
|
)
|
108
|
(10,808
|
)
|
|||||||||||
|
Interest
receivable
|
65
|
2
|
—
|
85
|
9
|
—
|
—
|
94
|
|||||||||||||||||
|
Interest
payable
|
(900
|
)
|
(1
|
)
|
—
|
(901
|
)
|
—
|
—
|
—
|
(901
|
||||||||||||||
|
(Loss)/profit
on ordinary activities before tax
|
(6,928
|
)
|
(3,086
|
)
|
(108
|
)
|
(10,122
|
)
|
883
|
(2,484
|
)
|
108
|
(11,615
|
)
|
|||||||||||
|
Tax
|
7,320
|
399
|
—
|
7,719
|
—
|
—
|
—
|
7,719
|
|||||||||||||||||
|
(Loss)/profit
for the year transferred to reserves
|
392
|
(2,687
|
)
|
(108
|
)
|
(2,403
|
)
|
883
|
(2,484
|
)
|
108
|
(3,896
|
)
|
||||||||||||
|
Earnings/(loss)
per share — basic
|
0.02
|
(0.67
|
)
|
(0.1
|
)
|
(0.18
|
)
|
||||||||||||||||||
|
Earnings/(loss)
per share — diluted
|
0.02
|
(0.67
|
)
|
(0.11
|
)
|
(0.18
|
)
|
||||||||||||||||||
|
Number
of shares (‘000)
|
17,940
|
4,000
|
21,440
|
21,440
|
|||||||||||||||||||||
(Loss)/earnings
per share has been calculated as the loss for the year divided by the number
of
shares in issue. Options granted were priced out of the money and therefore
caused no dilution to earnings per share. The number of shares on combination
represents Amarin’s number of shares of 17,940,000 at 30 June 2004 plus the
3,500,000 issued on acquisition to the vendors of Laxdale.
Notes
to
unaudited pro forma combined condensed consolidated income statement for the
year ended 31 December 2003
1.
This
column represents the income statement from continuing activities as extracted
from Amarin’s UK GAAP financial statements for the year ended 31 December
2003.
2.
This
column represents the income statement from continuing activities as extracted
from Laxdale’s UK GAAP financial statements for the year ended 31 March 2004.
Laxdale’s financial statements are denominated in pounds sterling and this
unaudited pro forma combined condensed consolidated US dollar financial
information has been prepared using the average rate for the year ended 31
March
2004 for the income statement and the rate as at 31 March 2004 for the balance
sheet.
3.
Adjustments on combination represents amortisation of intangible product rights,
arising on the acquisition of Laxdale. Under UK GAAP (FRS 7 para 1 and 2),
assets and liabilities are required to be fair valued if they are separately
identifiable, meaning disposable without disposal of the entity as a whole.
FRS
10 adds to the separability concept by stating that intangible assets should
be
recognised if they are controllable (eg via custody or legal rights) and
measurable (meaning valued according to a readily ascertainable market value
or
as in this case via a valuation model). Accordingly, a fair value exercise
was
undertaken and a valuation has been assigned to the intangible asset acquired.
Additionally, FRS 10 indicates that the value of the intangible that is
recognised on acquisition is limited to ensure that negative goodwill does
not
arise. Amortisation is charged for over the average patent life of the
underlying product rights, of 15.5 years. The specific derivation of the
intangible assets carrying value can be found in Table 3 to the 30 June
2004 combined condensed consolidated balance sheet, which gives a value of
$6,858,000. Annual amortisation charge over the 15.5 years useful economic
life
is $442,000.
F-19
4.
This
column shows the result of combining the effects of notes 1-3 above and forms
the unaudited pro forma combined condensed consolidated income statement for
the
acquisition of Laxdale by Amarin under UK GAAP.
5.
Adjustments represent differences between UK and US GAAP for Amarin, for the
year ended 31 December 2003, as extracted from Amarin’s 20-F for 2003. The
following analyses each of the adjustments; all amounts are in $’000 as per the
table above —
Turnover — $348
Under
UK
GAAP revenue is recognised on dispatch of goods. Under US GAAP revenue is
recognised on delivery to the customer, when title is deemed to pass. Normally,
there is an insignificant timing difference between dispatch and delivery to
the
customer and hence no adjustment is recorded. However, during the last week
of
December 2002, such a delay occurred and accordingly an adjustment of $348,000
was made in 2002 to reflect the profit element of sales ($736,000) recognised
under UK GAAP but deferred under US GAAP. The associated adjustment to cost
of
sales would be $388,000. During 2003, there were no such cut-off differences.
The 2003 adjustment reflects the reversal of the 2002 adjustment.
Operating
(expenses)/income — $526
Adjustments
to operating expenses comprise of the following, which are explained further
below —
|
Adjustment
for stock-based compensation and National Insurance
|
$(50)
|
|
Adjustment
for treatment of intangible fixed asset
|
$576
|
|
$526
|
Adjustment
for stock-based compensation and National Insurance
Under
UK
GAAP the Company has recorded a provision for $nil (31 December 2002: $50,000)
relating to National Insurance (“NI”) amounts payable on stock option gains at
the time of grant. Under UK GAAP NI contributions are accrued over the vesting
period of the underlying option. Under US GAAP payroll taxes on stock options
are accrued when the liability is incurred. The 2003 adjustment reflects the
release of the 2002 provision.
Adjustment
for treatment of intangible fixed asset
Under
UK
GAAP acquired pharmaceutical products which are in the clinical trials phase
of
development can be capitalized and amortized where there is a sufficient
likelihood of future economic benefit. Under US GAAP specific guidance relating
to acquired pharmaceutical products in the development phase requires such
amounts to be expensed unless they have attained certain regulatory
milestones.The 2003 adjustment reflects the reversal of amortisation charged
under UK GAAP.
Interest
receivable $9
|
Adjustment
for gain/(loss) on securities held for trading
|
$9
|
Under
UK
GAAP investments (including listed investments) held on current and long-term
basis are stated at the lower of cost or estimated fair value, less any
permanent diminution in value. Under US GAAP the carrying value of our
marketable equity securities is adjusted to reflect unrealized gains
F-20
and
losses resulting from movements in the prevailing market value. The 2003
adjustment reflects the change in value, under US GAAP, between 31 December
2002
and 31 December 2003.
6.
Adjustments represent US GAAP reconciling differences for Laxdale for the year
ended 31 March 2003. The following analyses each of the adjustments, all amounts
are in $’000 as per the table above —
Turnover — $(2,477)
Under
UK
GAAP, non-refundable licensing revenue in the form of milestone payments is
recognised upon transfer or licensing of intellectual property rights. Where
licensing agreements stipulate payment on a milestone basis, revenue is
recognised upon achievement of those milestones. Revenues are stated net of
value added tax and similar taxes. No revenue is recognised for consideration,
the receipt of which is dependent on future events, future performance or refund
obligations.
Under
US
GAAP and in accordance with Staff Accounting Bulletin 101 “Revenue Recognition
in Financial Statements”, as updated by Staff Accounting Bulletin 104 “Revenue
Recognition” and Emerging Issues Task Force or EITF00-21 “Revenue Arrangements
with Multiple Deliverables”, revenue from licensing agreements would be
recognised based upon the performance requirements of the agreement.
Non-refundable fees where the company has an ongoing involvement or performance
obligation, would be recorded as deferred revenue in the balance sheet and
amortized into license fees in the profit and loss account over the estimated
term of the performance obligation. The effect of these adjustments is to reduce
turnover by $2,477,000 in the year ended 31 March 2004. The company has received
£6,197,010 in non-refundable milestone income under license agreements with
its
licensing partners. Under the terms of the license agreements it is the
company’s responsibility to obtain approval of the licensed product and in
certain cases to supply the product to the licensee once the product is
approved. Under the terms of SABs 101 and 104 and EITF00-21, these milestone
fees would be deferred and amortized on a straight-line basis over the estimated
life of the patent. This is considered by the company to be the term of the
performance obligations under each license agreement.
Operating
expenses — $(7)
The
company does not fully provide for vacation expense. To comply with US GAAP
this
expense would be fully provided for.
7.
This
represents the removal, under US GAAP, of amortisation as charged under UK
GAAP.
As described in Note 3 above under UK GAAP capitalisation and amortisation
arise
on costs associated with the development of products. Under US GAAP, such costs
are expensed as incurred.
8.
This
represents the Unaudited pro forma combined condensed consolidated income
statement for Amarin’s acquisition of Laxdale and reflects those items disclosed
in notes 1 to 7.
F-21
Unaudited
pro forma combined condensed consolidated income statement and balance sheet
for
the combination at 30 June 2004
Unaudited
pro forma combined condensed consolidated income statement information is
presented for the combination for the six months ended 30 June 2004. The table
below also indicates the reference accounts, being the six months ended 30
June
2004 for Amarin and six months ended 30 September 2004 for Laxdale.
Laxdale’s
financial statements are prepared from unaudited condensed financial statements
(furnished under cover of a Report on Form 6-K on 7 February 2005).
These were prepared in sterling and have been converted into US dollars using
the average exchange rate for the six months ended 30 September 2004 for the
income statement and the rate as at 30 September 2004 for the balance
sheet.
Unaudited
pro forma combined condensed consolidated income statement — for the
combination for the 6 months ended 30 June 2004
|
30
June
2004
Amarin
UK
GAAP
$’000
|
3
September
2004
Laxdale
UK
GAAP
$’000
|
Adjustment
on
combination
$’000
|
Combined
UK
GAAP
$’000
|
Amarin
Adjustments
between
UK
and
US
GAAP
$’000
|
Laxdale
Adjustments
between
UK
and
US
GAAP
’000
|
Combination
Adjustments
between
UK
and
US
GAAP
$’000
|
Combined
US
GAAP
$’000
|
||||||||||||||||||
|
Note
1
|
Note
2
|
Note
3
|
Note
4
|
Note
5
|
Note
6
|
Note
7
|
Note
8
|
||||||||||||||||||
|
Reference
financial statements 6 months ended
|
|||||||||||||||||||||||||
|
Turnover
|
—
|
—
|
—
|
—
|
—
|
307
|
—
|
307
|
|||||||||||||||||
|
Cost
of sales
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
|||||||||||||||||
|
Gross
profit
|
—
|
—
|
—
|
—
|
—
|
307
|
—
|
307
|
|||||||||||||||||
|
Operating
(expenses)/income
|
(3,250
|
)
|
(2,279
|
)
|
(54
|
)
|
(5,583
|
)
|
394
|
18
|
54
|
(5,117
|
)
|
||||||||||||
|
Operating
(loss)/profit
|
(3,250
|
)
|
(2,279
|
)
|
(54
|
)
|
(5,583
|
)
|
394
|
325
|
54
|
(4,810
|
)
|
||||||||||||
|
Interest
receivable
|
39
|
—
|
—
|
39
|
(2
|
)
|
—
|
—
|
37
|
||||||||||||||||
|
Interest
payable
|
(136
|
)
|
(48
|
)
|
—
|
(184
|
)
|
(25
|
)
|
—
|
—
|
(209
|
)
|
||||||||||||
|
(Loss)/profit
on ordinary activities before tax
|
(3,347
|
)
|
(2,327
|
)
|
(54
|
)
|
(5,728)
|
)
|
367
|
325
|
54
|
(4,982
|
)
|
||||||||||||
|
Tax
|
(7,500
|
)
|
178
|
—
|
(7,322
|
)
|
—
|
—
|
—
|
(7,322
|
)
|
||||||||||||||
|
(Loss)/profit
for the year transferred to reserves
|
(10,847
|
)
|
(2,149
|
)
|
(54
|
)
|
(13,050
|
)
|
367
|
325
|
54
|
(12,304
|
)
|
||||||||||||
|
(Loss)/earnings
per share — basic
|
(0.60
|
)
|
(0.54
|
)
|
(0.61
|
)
|
(0.57
|
)
|
|||||||||||||||||
|
(Loss)/earnings
per share — diluted
|
(0.60
|
)
|
(0.54
|
)
|
(0.61
|
)
|
(0.57
|
)
|
|||||||||||||||||
|
Number
of shares (‘000)
|
17,940
|
4,000
|
21,440
|
21,440
|
|||||||||||||||||||||
(Loss)/earnings
per share has been calculated as the loss for the year divided by the number
of
shares in issue. No dilution arose due to option grant prices being below market
price. The number of shares on combination represents Amarin’s number of shares
at 30 June 2004 of 17,940,000 plus the 3,500,000 issued on acquisition to
the vendors of Laxdale.
Notes
to
unaudited pro forma combined condensed consolidated income statement for the
6
months ended 30 June 2004
1.
This
column represents the income statement from continuing activities as extracted
from Amarin’s UK GAAP interim financial statements for the 6 months ended 30
June 2004.
2.
This
column represents the income statement from continuing activities as extracted
from Laxdale’s UK GAAP financial statements for the 6 months ended 30 September
2004.
3.
Adjustments on combination represents amortisation of intangible product rights,
arising on the acquisition of Laxdale. Under UK GAAP (FRS 7 para 1 and 2),
assets and liabilities are required to be fair valued if they are separately
identifiable, meaning disposable without disposal of the entity as a whole.
FRS
10 adds to the separability concept by stating that intangible assets should
be
recognised if they are controllable (eg via custody or legal rights) and
measurable (meaning valued according to a readily ascertainable market value
or
as in this case via a valuation model). Accordingly, a fair value
F-22
exercise
was undertaken and a valuation has been assigned to the intangible asset
acquired. Additionally, FRS 10 indicates that the value of the intangible that
is recongised on acquisition is limited to ensure that negative goodwill does
not arise.
The
amortization charge adjustment for the 6 month period, to amortize both the
newly acquired intangible and November 2000 intangible is $54,000. See
note 3 to the unaudited pro forma condensed consolidated income statement
for the combination at 31 December 2003.
4.
This
column shows the result of combining the effects of notes 1-3 above and forms
the Unaudited pro forma combined condensed consolidated combined income
statement for the acquisition of Laxdale by Amarin under UK GAAP.
5.
Adjustments represent US GAAP reconciling differences for Amarin for the 6
months ended 30 June 2004. The following analyses each of the adjustments,
all
amounts are in $’000 as per the table above —
Operating
expenses — $394
Adjustments
to operating expenses comprise of the following, which are explained further
below —
|
Adjustment
for treatment of intangible fixed
|
$394
|
Under
UK
GAAP the value of acquired rights to pharmaceutical products which are in the
clinical trials phase of development can be capitalized and amortized where
there is a sufficient likelihood of future economic benefit. Under US GAAP
specific guidance relating to pharmaceutical products in the development phase
requires such amounts to be expensed unless they have attained certain
regulatory milestones. The adjustment reflects the reversal of amortisation
charged under UK GAAP.
Interest
receivable/(payable) $(2)
|
Adjustment
for gain/(loss) on securities held for trading
|
$(2)
|
Under
UK
GAAP investments (including listed investments) held on current and long-term
basis are stated at the lower of cost or estimated fair value, less any
permanent diminution in value. Under US GAAP the carrying value of marketable
equity securities is adjusted to reflect unrealized gains and losses resulting
from movements in the prevailing market value. The 2004 adjustment reflects
the
change in value, under US GAAP, between 31 December 2003 and 30 June
2004.
Interest
payable — $(25)
Adjustments
to operating expenses comprise of the following, which are explained further
below —
|
Amortisation
of discount on loan note
|
$(25)
|
Under
US
GAAP the loan note and the warrants issued to Elan (a related party) have been
accounted for under APB 14, so that the proceeds of the loan note have been
allocated between the debt and the warrants based on their relative fair values.
The debt is being accreted up to its face value over the term of the loan note,
with a corresponding charge to interest expense. The 2004 charge is $25,000.
The
fair value of the warrants is being retained in additional paid in capital
until
such times as they are exercised, lapse, or are otherwise dealt with. Under
UK
GAAP the warrants are regarded as not having affected the finance cost of the
loan note.
6.
Adjustments represent US GAAP reconciling differences for Laxdale for the year
ended 31 March 2003. The following analyses each of the adjustments, all amounts
are in $’000 as per the table above —
Turnover — $307
F-23
Under
UK
GAAP, non-refundable licensing revenue in the form of milestone payments is
recognised upon transfer or licensing of intellectual property rights. Where
licensing agreements stipulate payment on a milestone basis, revenue is
recognised upon achievement of those milestones. Revenues are stated net of
value added tax and similar taxes. No revenue is recognised for consideration,
the receipt of which is dependent on future events, future performance or refund
obligations.
Under
US
GAAP and in accordance with Staff Accounting Bulletin 101 “Revenue Recognition
in Financial Statements”, as updated by Staff Accounting Bulletin 104 “Revenue
Recognition” and Emerging Issues Task Force or EITF00-21 “Revenue Arrangements
with Multiple Deliverables”, revenue from licensing agreements would be
recognised based upon the performance requirements of the agreement.
Non-refundable fees where the company has an ongoing involvement or performance
obligation, would be recorded as deferred revenue in the balance sheet and
amortized into license fees in the profit and loss account over the estimated
term of the performance obligation. The effect of these adjustments is to
increase turnover by $307,000 in the 6 months ended 30 September
2004.
The
company received non-refundable milestone income under license agreements with
its licensing partners. Under the terms of the license agreements it is the
company’s responsibility to obtain approval of the licensed product and in
certain cases to supply the product to the licensee once the product is
approved. Under the terms of SABs 101 and 104 and EITF00-21, these milestone
fees would be deferred and amortized on a straight-line basis over the estimated
life of the patent. This is considered by the company to be the term of the
performance obligations under each license agreement.
Operating
expenses — $18
Under
UK
GAAP Laxdale does not fully provide for vacation expense. To comply with US
GAAP
this expense would be fully provided for. The adjustment in the 6 months ended
30 September 2004 represents the release of the provision for vacation
expense.
7.
This
represents the removal, under US GAAP, of amortisation as charged under UK
GAAP.
As described in Note 3 above under UK GAAP capitalisation and amortisation
arise
on costs associated with the acquisition of products in clinical development.
Under US GAAP, such costs are expensed.
8.
This
represents the unaudited pro forma combined condensed consolidated income
statement for Amarin’s acquisition of Laxdale under US GAAP and reflects those
items disclosed in notes 1 to 7.
F-24
Unaudited
pro forma combined condensed consolidated balance sheet as at 30 June
2004
Below
are
several tables (Tables 1-4) showing the various steps in order to arrive at
the
unaudited pro forma combined condensed consolidated combined balance sheet
under
US GAAP, as shown in the final column of Table 4.
Table
1 — Amarin at 30 June 2004, as adjusted for material post balance
sheet events (“pbse”)
|
Valcant
|
Private
placement
|
Debt/Equity
conversion
|
||||||||||||||
|
Amarin
material post balance sheet events
|
Amarin
as
adjusted for
pbse
UK
GAAP
$’000
|
|||||||||||||||
|
30
June 2004
Amarin
UK
GAAP
$’000
|
UK
GAAP
$’000
|
UK
GAAP
$’000
|
UK
GAAP
$’000
|
|||||||||||||
|
Note
1
|
Note
1a
|
Note
1b
|
Note
1c
|
Note
2
|
||||||||||||
|
Unaudited
pro forma combined condensed
consolidated
Balance sheet
|
||||||||||||||||
|
Intangible
fixed assets
|
3,755
|
—
|
—
|
—
|
3,755
|
|||||||||||
|
Tangible
fixed assets
|
261
|
—
|
—
|
—
|
261
|
|||||||||||
|
Fixed
assets
|
4,016
|
—
|
—
|
—
|
4,016
|
|||||||||||
|
Debtors
|
913
|
2,000
|
—
|
—
|
2,913
|
|||||||||||
|
Investments
|
—
|
—
|
—
|
—
|
—
|
|||||||||||
|
Cash
at bank and in hand
|
7,211
|
—
|
12,775
|
—
|
19,986
|
|||||||||||
|
Current
assets
|
8,124
|
2,000
|
12,775
|
—
|
22,899
|
|||||||||||
|
Creditors:
Amounts due within one year
|
(2,899
|
)
|
(1,000
|
)
|
—
|
—
|
(3,899
|
)
|
||||||||
|
Net
current assets/(liabilities)
|
5,225
|
1,000
|
12,775
|
—
|
19,000
|
|||||||||||
|
Total
assets less current liabilities
|
9,241
|
1,000
|
12,775
|
—
|
23,016
|
|||||||||||
|
Creditors:
Amounts due outside one year
|
(5,000
|
)
|
—
|
—
|
3,000
|
(2,000
|
)
|
|||||||||
|
Net
assets/(liabilities)
|
4,241
|
1,000
|
12,775
|
3,000
|
21,016
|
|||||||||||
|
Capital
and Reserves
|
||||||||||||||||
|
Called
up share capital
|
1,454
|
—
|
1,199
|
242
|
2,895
|
|||||||||||
|
Treasury
shares
|
—
|
—
|
—
|
—
|
—
|
|||||||||||
|
Capital
redemption reserve
|
27,634
|
—
|
—
|
—
|
27,634
|
|||||||||||
|
Share
premium account
|
70,223
|
—
|
11,576
|
2,758
|
84,557
|
|||||||||||
|
Profit
and loss reserves/(deficit)
|
(95,070
|
)
|
1,000
|
—
|
—
|
(94,070
|
)
|
|||||||||
|
Equity
shareholders’ funds
|
4,241
|
1,000
|
12,775
|
3,000
|
21,016
|
|||||||||||
Notes
to
unaudited pro forma combined condensed consolidated balance sheet as adjusted
for post balance sheet events
1.
This
column represents the balance sheet as extracted from Amarin’s UK GAAP interim
financial statements as at 30 June 2004. Amarin’s balance sheet at 30 June 2004
has been adjusted for the following material post balance events which occurred
between the deemed reference date for Amarin, of 30 June 2004 and the
consummation of the acquisition of Laxdale on 8 October 2004, these are
explained more fully in the “Recent developments’ section of this
filing.
a.
Valeant settlement — 29 September 2004 a dispute was settled with
Valeant Pharmaceuticals Inc following the sale of Amarin’s US operations and
certain product rights and product lines. This resulted in a receivable of
$2m
from Valeant and a payable to Elan of $1m.
F-25
b.
Private placement — 7 October 2004 Amarin raised $12.775m via a
private placement of shares to existing shareholders, new shareholders and
management.
c.
Debt/equity conversion — 7 October 2004 The non-executive chairman, Mr
Thomas Lynch, purchased the shares, loan notes and warrants held by Elan.
Following this purchase, Mr Lynch converted $3m of the $5m loan note into equity
shares.
2.
The
resulting balance sheet for Amarin, as adjusted for material post balance sheet
events form the starting for the unaudited pro forma combined condensed
consolidated balance sheet, in Table 3.
Table
2 — Laxdale at 30 September 2004, as adjusted for material post
balance sheet events (“pbse”)
|
Scarista
payment
|
||||||||||
|
30-Sep-04
|
Laxdale
as
adjusted
for
pbse
UK
GAAP
$’000
|
|||||||||
|
Unaudited
pro forma combined condensed consolidated balance
sheet
|
Laxdale
UK
GAAP
$’000
|
Laxdale
pbse
UK
GAAP
$’000
|
||||||||
|
Note
3
|
Note
4
|
Note
5c
|
||||||||
|
Intangible
fixed assets
|
—
|
—
|
—
|
|||||||
|
Tangible
fixed assets
|
221
|
—
|
221
|
|||||||
|
Fixed
assets
|
221
|
—
|
221
|
|||||||
|
Debtors
|
1,056
|
—
|
1,056
|
|||||||
|
Investments
|
284
|
—
|
284
|
|||||||
|
Cash
at bank and in hand
|
1
|
(890
|
)
|
(889
|
)
|
|||||
|
Current
assets/(liabilities)
|
1,341
|
(890
|
)
|
451
|
||||||
|
Creditors:
Amounts due within one year
|
(3,677
|
)
|
—
|
(3,677
|
)
|
|||||
|
Net
current assets/(liabilities)
|
(2,336
|
)
|
(890
|
)
|
(3,226
|
)
|
||||
|
Total
assets less current liabilities
|
(2,115
|
)
|
(890
|
)
|
(3,005
|
)
|
||||
|
Creditors:
Amounts due outside one year
|
—
|
—
|
—
|
|||||||
|
Net
assets/(liabilities)
|
(2,115
|
)
|
(890
|
)
|
(3,005
|
)
|
||||
|
Capital
and Reserves
|
||||||||||
|
Called
up share capital
|
7,189
|
—
|
7,189
|
|||||||
|
Treasury
shares
|
—
|
—
|
—
|
|||||||
|
Capital
redemption reserve
|
—
|
—
|
—
|
|||||||
|
Share
premium account
|
8,987
|
—
|
8,987
|
|||||||
|
Profit
and loss reserves/(deficit)
|
(18,291
|
)
|
(890
|
)
|
(19,181
|
)
|
||||
|
Equity
shareholders’ funds
|
(2,115
|
)
|
(890
|
)
|
(3,005
|
|||||
Notes
to
unaudited pro forma combined condensed consolidated balance sheet as adjusted
for post balance sheet events
3.
Laxdale’s balance sheet at 30 September 2004, as extracted from unaudited
condensed financial statements (furnished under cover of a Report on
Form 6-K on 7 February 2005), has been adjusted for the following
material post balance events which occurred between the deemed reference date
for Laxdale, of 30 September 2004 and the consummation of the acquisition of
Laxdale on 8 October 2004.
4.
On 8
October 2004 and coinciding with the acquisition, Laxdale paid Scarista Limited,
a fee of £500,000 ($890,000) to reduce a potential future royalty on Miraxion
from 15% to 5%. Prior to Amarin acquiring Laxdale, Scarista Limited was a
company related to Laxdale via common ownership, see note 20 of Laxdale’s
financial statements preceding this section of unaudited pro forma combined
condensed consolidated disclosure. This adjustment is not recorded within the
income statement as it is a non-
F-26
recurring
charge that will be included in the income statement of the registrant within
the 12 months following the acquisition.
5.
The
resulting balance sheet for Laxdale, as adjusted for material post balance
sheet
events forms the starting for the combined unaudited pro forma combined
condensed consolidated balance sheet in Table 3.
Table
3 — Unaudited pro forma combined condensed consolidated balance sheet
at 30 June 2004 (UK GAAP)
|
Amarin
as
adjusted
for
pbse
UK
GAAP
$’000
|
Laxdale
as
adjusted
for
pbse
UK
GAAP
$’000
|
||||||||||||||||||||||||
|
Non
coterminous
adjustment
$’000
|
Adjustments
on
combination
$’000
|
Adjustments
on
combination
$’000
|
Adjustments
on
combination
$’000
|
Adjustments
on
combination
$’000
|
Combined
UK
GAAP
$’000
|
||||||||||||||||||||
|
Table
1,
Note
2
|
Table
2,
Note
5
|
Note
6
|
Note
7
|
Note
8
|
Note
9
|
Note
10
|
Note
11
|
||||||||||||||||||
|
Intangible
fixed assets
|
3,755
|
—
|
—
|
6,858
|
—
|
—
|
—
|
10,613
|
|||||||||||||||||
|
Tangible
fixed assets
|
261
|
221
|
—
|
(3
|
)
|
—
|
—
|
—
|
479
|
||||||||||||||||
|
Fixed
assets
|
4,016
|
221
|
—
|
6,855
|
—
|
—
|
—
|
11,092
|
|||||||||||||||||
|
Debtors
|
2,913
|
1,056
|
1,305
|
—
|
—
|
(1,844
|
)
|
—
|
3,430
|
||||||||||||||||
|
Investments
|
—
|
284
|
—
|
(67
|
)
|
—
|
—
|
(217
|
)
|
—
|
|||||||||||||||
|
Cash
at bank and in hand
|
19,986
|
(889
|
)
|
(1,305
|
)
|
—
|
—
|
—
|
—
|
17,792
|
|||||||||||||||
|
Current
assets
|
22,899
|
451
|
—
|
(67
|
)
|
—
|
(1,844
|
)
|
(217
|
)
|
21,222
|
||||||||||||||
|
Creditors:
Amounts due within one year
|
(3,899
|
)
|
(3,677
|
)
|
—
|
(893
|
)
|
—
|
1,844
|
—
|
(6,625
|
)
|
|||||||||||||
|
Net
current assets/(liabilities)
|
19,000
|
(3,226
|
)
|
—
|
(960
|
)
|
—
|
—
|
(217
|
)
|
14,597
|
||||||||||||||
|
Total
assets less current liabilities
|
23,016
|
(3,005
|
)
|
—
|
5,895
|
—
|
—
|
(217
|
)
|
25,689
|
|||||||||||||||
|
Creditors:
Amounts due outside one year
|
(2,000
|
)
|
—
|
—
|
—
|
—
|
—
|
—
|
(2,000
|
)
|
|||||||||||||||
|
Net
assets/(liabilities)
|
21,016
|
)
|
(3,005
|
)
|
—
|
5,895
|
—
|
—
|
(217
|
)
|
23,689
|
||||||||||||||
|
Capital
and Reserves
|
|||||||||||||||||||||||||
|
Called
up share capital
|
2,895
|
—
|
311
|
(7,189
|
)
|
—
|
—
|
3,206
|
|||||||||||||||||
|
Treasury
shares
|
—
|
—
|
—
|
—
|
—
|
(217
|
)
|
(217
|
)
|
||||||||||||||||
|
Capital
redemption reserve
|
27,634
|
—
|
—
|
—
|
—
|
—
|
27,634
|
||||||||||||||||||
|
Share
premium account
|
84,557
|
—
|
3,469
|
(8,987
|
)
|
—
|
—
|
88,026
|
|||||||||||||||||
|
Profit
and loss reserves/(deficit)
|
(94,070
|
)
|
—
|
—
|
18,291
|
—
|
—
|
(94,960
|
)
|
||||||||||||||||
|
Equity
shareholders’ funds
|
21,016
|
(3,005
|
)
|
—
|
3,780
|
2,115
|
—
|
(217
|
)
|
23,689
|
|||||||||||||||
Notes
to
Unaudited pro forma combined condensed consolidated UK GAAP balance sheet at
30
June 2004
The
Amarin and Laxdale balance sheet dates at the reference dates of 30 June 2004
and 30 September 2004, respectively as adjusted for material post balance sheet
date adjustments, per Table 1, Note 1 and Table 2, Note 4 respectively, are
further adjusted by the following UK GAAP adjustments, as described by the
following notes —
6.
The
reference date for Amarin is 30 June 2004, while for Laxdale it is 30 September.
Amarin funded Laxdale’s working capital during this period and this adjustment
reflects the non-coterminus nature of these reference dates and the amount
of
additional funding provided by Amarin to fund Laxdale’s
operations.
F-27
7.
This
adjustment reflects the purchase of the intangible asset, tangible fixed assets
and working capital items as financed by shares issued at a premium. The
following analyses the fair value accounting under UK GAAP (FRS 6, FRS 7, FRS
10).
|
October
8, 2004
Laxdale
$’000
|
Fair
value
adjustment
$’000
|
UK
GAAP
Acquisition
Accounting
$’000
|
||||||||
|
Intangible
fixed assets
|
—
|
6,858
|
6,858
|
|||||||
|
Tangible
fixed assets
|
218
|
—
|
218
|
|||||||
|
Investments
|
282
|
(65
|
)
|
217
|
||||||
|
Net
current liabilities
|
(2,700
|
)
|
—
|
(2,700
|
)
|
|||||
|
Net
liabilities acquired
|
(2,200
|
)
|
6,793
|
4,593
|
||||||
|
Consideration
|
No.
of Shares (‘000
|
)
|
$ | |||||||
|
— shares
issued at fair value (market value)
|
3,500
|
1.08
|
3,780
|
|||||||
|
— Other
costs of acquisition
|
813
|
|||||||||
|
Goodwill
|
—
|
|||||||||
Fair
value adjustments have been considered for all assets/liabilities present on
Laxdale’s balance sheet at the date of acquisition (8 October 2004). For asset
classes other than intangible fixed assets and investments, no fair value
adjustment has been proposed due to materiality and specifically, the ongoing
use of certain items such as tangible fixed assets and the proximity to
settlement for the other current assets and liabilities. Other pre-acquisition
additional liabilities have been considered but none have been noted as they
do
not meet the FRS 7 definitions in that there were no demonstrable commitments
that would happen irrespective of the acquisition being consummated or not.
As
the acquisition accounting was performed as at 8 October 2004 whereas the
rest of the pro-formas have been prepared as at 30 September 2004, minor
differences arise due to the actual exchange rates at 8 October 2004 being
applied to assets and liabilities acquired, as opposed to the rates at
30 September 2004.
The
most
significant fair value adjustment is the recognition of the intangible,
representing intellectual property rights. Per FRS 7, (para 1 and 2), the
recognition criteria for intangible assets of separability (can be disposed
of
separately from the company as a whole) and control (either via custody or
legal/contractual rights) are met, as is the FRS 5 definition of an asset,
being
the right to future exconomic benefits. Per FRS 10, reliable measurement of
the
intangible is achieved by discounted cashflow analysis resulting in a valuation
which is capped by FRS 10 para 10 such that negative goodwill does not arise.
This gives rise to the recognition of an intangible asset, representing
intellectual property rights of $6,858,000.
Laxdale
has a shareholding in Amarin (see note 10). The fair value adjustment to
investments, of $65,000, writes down the value of these shares from that held
within Laxdale’s financial statements to the fair value at 8 October 2004.
This value was $1.08 per share.
The
increase in creditors of $893,000 reflects the costs of the transaction together
with a $80,000 adjustment reflecting the working capital movement for Laxdale
for the 8 days of October 2004.
The
movement on share capital represents the nominal value of the shares issued,
being 3,500,000 shares of £0.05 each (or approximately $0.09, at the acquisition
date) giving $311,000. The movement on share premium represents the difference
between the market value and the nominal value, being $1.08 less $0.09 ($0.99),
of the shares issued. So $0.99 multiplied by 3,500,000 gives $3,469,000 of
share
premium.
8.
This
shows the removal of Laxdale’s pre-acquisition capital and
reserves.
9.
This
reflects the removal of loan balances between Amarin and Laxdale which eliminate
on consolidation.
10.
Laxdale has a shareholding in Amarin dating back to November 2000. Under UITF37
these shares are classed as “treasury shares” and this adjustment reflects the
reclassification of these shares from investments, as recorded in Laxdale’s
single entity financial statements to treasury shares within the combined
balance sheet.
11.
This
represents the unaudited pro forma combined condensed consolidated balance
sheet
for Amarin’s acquisition of Laxdale under UK GAAP and this forms the starting
point for the following table of adjustments which shows the further adjustments
required to arrive at the combined US GAAP balance. See Table 4,
below.
F-28
Table
4 — Unaudited pro forma combined condensed consolidated balance sheet
at 30 June 2004 (US GAAP)
|
Combined
UK
GAAP
$’000
|
Combination
Adjustments
between
UK
and
US GAAP
$’000
|
Combination
Adjustments
between
UK
and
US GAAP
$’000
|
Combination
Adjustments
between
UK
and
US GAAP
$’000
|
Combination
Adjustments
between
UK
and
US GAAP
$’000
|
Amarin
Adjustments
between
UK
and
US GAAP
$’000
|
Amarin
Adjustments
between
UK
and
US GAAP
$’000
|
Amarin
Adjustments
between
UK
and
US GAAP
$’000
|
Combined
US
GAAP
$’000
|
||||||||||||||||||||
|
Table
3,
Note
11
|
Table
2,
Note
12
|
Note
13
|
Note
14
|
Note
15
|
Note
9
|
Note
10
|
Note
11
|
Note
19
|
||||||||||||||||||||
|
Unaudited
pro forma combined condensed consolidated Balance
sheet
|
||||||||||||||||||||||||||||
|
Goodwill/negative
goodwill
|
—
|
(41,354
|
)
|
41,354
|
—
|
—
|
—
|
—
|
—
|
—
|
||||||||||||||||||
|
Intangible
fixed assets
|
10,613
|
41,377
|
(41,168
|
)
|
(7,067
|
)
|
—
|
(3,755
|
)
|
—
|
—
|
—
|
||||||||||||||||
|
Tangible
fixed assets
|
479
|
—
|
(186
|
)
|
—
|
—
|
—
|
—
|
—
|
293
|
||||||||||||||||||
|
Fixed
assets
|
11,092
|
23
|
—
|
(7,067
|
)
|
—
|
(3,755
|
)
|
—
|
—
|
293
|
|||||||||||||||||
|
Debtors
|
3,430
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
3,430
|
|||||||||||||||||||
|
Investments
|
—
|
—
|
—
|
—
|
—
|
14
|
—
|
—
|
14
|
|||||||||||||||||||
|
Cash
at bank and in hand
|
17,792
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
17,792
|
|||||||||||||||||||
|
Current
assets
|
21,222
|
—
|
—
|
—
|
—
|
14
|
—
|
—
|
21,236
|
|||||||||||||||||||
|
Creditors:
Amounts due within one year
|
(6,625
|
)
|
(23
|
)
|
—
|
—
|
—
|
(71
|
)
|
—
|
—
|
(6,719
|
)
|
|||||||||||||||
|
Net
current assets/(liabilities)
|
14,597
|
(23
|
)
|
—
|
—
|
—
|
(57
|
)
|
—
|
—
|
14,517
|
|||||||||||||||||
|
Total
assets less current liabilities
|
25,689
|
—
|
—
|
(7,067
|
)
|
—
|
(3,812
|
)
|
—
|
—
|
14,810
|
|||||||||||||||||
|
Deferred
tax liability
|
—
|
—
|
(3,029
|
)
|
—
|
3,029
|
—
|
—
|
—
|
—
|
||||||||||||||||||
|
Creditors:
Amounts due outside one year
|
(2,000
|
)
|
—
|
—
|
—
|
—
|
432
|
(432
|
)
|
389
|
(1,611
|
)
|
||||||||||||||||
|
Net
assets/(liabilities)
|
23,689
|
—
|
(3,029
|
)
|
(7,067
|
)
|
3,029
|
(3,380
|
)
|
(432
|
)
|
389
|
13,199
|
|||||||||||||||
|
Capital
and Reserves
|
||||||||||||||||||||||||||||
|
Called
up share capital
|
3,206
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
3,206
|
|||||||||||||||||||
|
Treasury
shares
|
(217
|
)
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
(217
|
)
|
|||||||||||||||||
|
Capital
redemption reserve
|
27,634
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
27,634
|
|||||||||||||||||||
|
Share
premium account
|
88,026
|
—
|
—
|
—
|
—
|
457
|
(457
|
)
|
389
|
88,415
|
||||||||||||||||||
|
Profit
and loss reserves
|
(94,960
|
)
|
—
|
(3,029
|
)
|
(7,067
|
)
|
3,029
|
(3,837
|
)
|
25
|
—
|
(105,839
|
)
|
||||||||||||||
|
Equity
shareholders’ funds
|
23,689
|
—
|
(3,029
|
)
|
(7,067
|
)
|
3,029
|
(3,380
|
)
|
(432
|
)
|
389
|
13,199
|
|||||||||||||||
F-29
Notes
to
Unaudited pro forma combined condensed consolidated US GAAP balance sheet at
30
June 2004
The
above
takes the combined UK GAAP balance sheet and makes the following adjustments
in
arriving at the US GAAP combined balance sheet, as shown by the following
notes —
12.
This
shows the negative goodwill arising on the acquisition due to the fair value
of
the separate net assets exceeding the fair value of the consideration. The
additional value assigned under US GAAP to the intangible asset is shown
(representing the difference between the value under UK GAAP and US GAAP)
together with the impact of Laxdale’s US GAAP revenue recognition difference
under SAB104 leading to the deferral of revenue. Below is the US GAAP fair
value
accounting in accordance with FAS 141 — Business Combinations.
|
October
8, 2004
Laxdale
$’000
|
Fair
value
Adjustment
$’000
|
US
GAAP
Acquisition
ccounting
$’000
|
UK
GAAP
Acquisition
Accounting
$’000
|
Difference
between
US
and
UK GAAP
$’000
|
||||||||||||
|
Intangible
fixed assets
|
—
|
48,235
|
48,235
|
6,858
|
41,377
|
|||||||||||
|
Tangible
fixed assets
|
218
|
—
|
218
|
218
|
—
|
|||||||||||
|
Investments
|
282
|
(65
|
)
|
217
|
217
|
—
|
||||||||||
|
Net
current liabilities
|
(2,700
|
)
|
—
|
(2,700
|
)
|
(2,700
|
)
|
—
|
||||||||
|
US
GAAP differences — see below
|
(4,280
|
)
|
4,257
|
(23
|
)
|
—
|
(23
|
)
|
||||||||
|
Net
liabilities acquired
|
(6,480)
|
)
|
52,427
|
45,947
|
4,593
|
41,354
|
||||||||||
|
No.
of Shares (‘000)
|
$ | |||||||||||||||
|
— shares
issued at fair value (market value)
|
3,500
|
1.08
|
3,780
|
3,780
|
||||||||||||
|
— Other
costs of acquisition
|
813
|
813
|
||||||||||||||
|
Negative
goodwill
|
(41,354
|
)
|
—
|
|||||||||||||
Investments
have been reclassified from net current liabilities for the table
above.
Laxdale’s
US GAAP differences are in respect of the following —
Under
UK
GAAP, non-refundable licensing revenue in the form of milestone payments is
recognised upon transfer or licensing of intellectual property rights. Where
licensing agreements stipulate payment on a milestone basis, revenue is
recognised upon achievement of those milestones. Revenues are stated net of
value added tax and similar taxes. No revenue is recognised for consideration,
the receipt of which is dependent on future events, future performance or refund
obligations.
Under
US
GAAP and in accordance with Staff Accounting Bulletin 101 “Revenue Recognition
in Financial Statements”, as updated by Staff Accounting Bulletin 104 “Revenue
Recognition” and Emerging Issues Task Force or EITF00-21 “Revenue Arrangements
with Multiple Deliverables”, revenue from licensing agreements would be
recognised based upon the performance requirements of the agreement.
Non-refundable fees where the company has an ongoing involvement or performance
obligation, would be recorded as deferred revenue in the balance sheet and
amortized into license fees in the profit and loss account over the estimated
term of the performance obligation. The effect of these adjustments is to
increase turnover by $307,000 in the 6 months ended 30 September 2004. As at
30
September 2004, Laxdale held a total of $4,257,000 of deferred revenue on its
balance sheet under US GAAP, analysed as $608,000 due to be released to income
within one year and $3,649,000 representing the fair value of the deferred
revenue for phased release after more than one year. Under
F-30
EITF01-03,
the future milestone fees associated with future performance obligations of
existing license agreements are at market rates relative to the future work
being performed. Therefore, the deferred revenue is written off as part of
the
purchase price allocation and has been shown within the fair value adjustments
above.
The
company received non-refundable milestone income under license agreements with
its licensing partners. Under the terms of the license agreements it is the
company’s responsibility to obtain approval of the licensed product and in
certain cases to supply the product to the licensee once the product is
approved. Under the terms of SABs 101 and 104 and EITF00-21, these milestone
fees would be deferred and amortized on a straight-line basis over the estimated
life of the patent. This is considered by the company to be the term of the
performance obligations under each license agreement. Under UK GAAP Laxdale
does
not fully provide for vacation expense. To comply with US GAAP this expense
would be fully provided for. At 30 September the vacation provision was
$23,000.
13.
Under
US GAAP, FAS 141 para 44, negative goodwill must be applied on a pro-rata basis
to certain non-current assets (excluding investments), this is shown in below
table. The majority of the negative goodwill is applied against the intangible
asset. Additionally, per FAS 141 para 38, and FAS 109
para 30, Accounting for Income Taxes, business combinations are required to
account for deferred tax assets and liabilities arising on the difference
between book value and fair value. The intangible fixed asset arising on
consolidation gives rise to a deferred tax liability, as shown
below.
|
October
8, 2004
Laxdale
$’000
|
Fair
value
Adjustment
$’000
|
US
GAAP
Acquisition
Accounting
$’000
|
Pro-rata
negative
goodwill
application
$’000
|
Remaining
after
pro-rata
negative
goodwill
application
’000
|
Deferred
tax
iability
$’000
|
After
pro-rata
of
negative
goodwill
and
deferred
tax
liability
$’000
|
||||||||||||||||
|
Intangible
fixed assets
|
—
|
48,235
|
48,235
|
(41,168
|
)
|
7,067
|
—
|
7,067
|
||||||||||||||
|
Deferred
tax liability
|
—
|
—
|
—
|
—
|
—
|
(3,029
|
)
|
(3,029
|
)
|
|||||||||||||
|
Tangible
fixed assets
|
218
|
—
|
218
|
(186
|
)
|
32
|
—
|
32
|
||||||||||||||
|
Investments
|
282
|
(65
|
)
|
217
|
217
|
—
|
217
|
|||||||||||||||
|
Net
current liabilities
|
(2,700
|
)
|
—
|
(2,700
|
)
|
(2,700
|
)
|
—
|
(2,700
|
)
|
||||||||||||
|
US
GAAP differences — see below
|
(4,280
|
)
|
4,257
|
(23
|
)
|
(23
|
)
|
—
|
(23
|
)
|
||||||||||||
|
Net
liabilities)acquired
|
(6,480
|
)
|
52,427
|
45,947
|
4,593
|
(3,029
|
)
|
1,564
|
||||||||||||||
|
No.
of shares
(‘000)
|
$ | |||||||||||||||||||||
|
—
shares issued at fair value (market value)
|
3,500
|
1.08
|
3,780
|
|||||||||||||||||||
|
—
Other costs of acquisition
|
813
|
|||||||||||||||||||||
|
Negative
goodwill
|
(41,354
|
)
|
(41,354
|
)
|
||||||||||||||||||
14.
This
shows the write-off, in accordance with US GAAP, of the remaining intangible
asset that was created by the acquisition, as shown in the above table to Note
13, of $7,067,000. This write-off is not recorded as an adjustment in the income
statement as it is a non-recurring charge attributable to the acquisition of
Laxdale that will be included in the income statement of the registrant within
the 12 months following the acquisition. Also shown is the write-off of the
remaining deferred tax liability, arising from the recognition of the intangible
asset on acquisition, remaining after the pro rata of negative
goodwill.
F-31
15.
This
shows the write-off, in accordance with US GAAP, of the related deferred tax
liability following the write-off of the intangible asset (Note 14) that
was created by the acquisition, as shown in the table above
(Note 13).
16.
The
final adjustment shows all the US GAAP adjustments associated with Amarin as
reflected in its interim financial statements for the six months ended 30 June
2004.
Below
are
the details regarding Amarin’s US GAAP adjustments
|
$’000
|
||
|
Intangible
fixed assets
|
Adjustment
for treatment of intangible fixed asset
|
(3,755)
|
|
Investments
|
Adjustment
for gain on securities held for trading
|
14
|
|
Creditors:
Amounts due within one year
|
Adjustment
for revenue recognition
|
(617)
|
|
Adjustment
for preferred dividend
|
546
|
|
|
(71)
|
||
|
Creditors:
Amounts due outside one year
|
Unamortized
discount on loan note
|
432
|
Adjustment
for treatment of intangible fixed asset
Under
UK
GAAP the value of acquired rights to pharmaceutical products which are in the
clinical trials phase of development can be capitalised and amortized where
there is a sufficient likelihood of future economic benefit. Under US GAAP
specific guidance relating to pharmaceutical products in the development phase
requires such amounts to be expensed unless they have attained certain
regulatory milestones.
Under
UK
GAAP the Company has capitalised $3,755,000 at June 30, 2004 relating to
Miraxion (formerly known as Lax-101). This is expensed under US
GAAP.
Adjustment
for gain on securities held for trading
Under
UK
GAAP investments (including listed investments) held on current and long-term
basis are stated at the lower of cost or estimated fair value, less any
permanent diminution in value. Under US GAAP the carrying value of our
marketable equity securities is adjusted to reflect unrealized gains and losses
resulting from movements in the prevailing market value. The market value of
the
securities at 30 June 2004 was $14,000, this had not been recogonised under
UK
GAAP.
Adjustment
for revenue recognition
Under
UK
GAAP milestone payments have been recognized when achieved. Under US GAAP,
the
Company’s adoption of SAB 101 (which has now been updated by SAB 104) resulted
in a $617,000 cumulative adjustment in respect of its accounting for certain
up-front payments and refundable milestone payments. No deferred revenue was
released to income in the 6 month period to 30 June 2004.
Adjustment
for preferred dividend
Under
UK
GAAP cumulative preferred dividends are accrued whether paid or not. Under
US
GAAP, preferred dividends are not accounted for until declared. The Company’s
issued preference shares have now been converted into ordinary
shares.
Unamortized
discount on loan note
F-32
Under
US
GAAP the loan note and the warrants issued to Elan (see note 6) have been
accounted for under APB 14, so that the proceeds of the loan note have been
allocated between the debt and the warrants based on their relative fair values.
The debt is being accreted up to its face value over the term of the loan note,
with a corresponding charge to interest expense. The fair value of the warrants
is being retained in additional paid in capital until such times as they are
exercised, lapse, or are otherwise dealt with. Under UK GAAP the warrants are
regarded as not having affected the finance cost of the loan note. See
Note 17 below.
17.
This
represents the redemption write-off of the discount on the loan note following
the redemption in the loan note of $5,000,000 and reissue of the new $2,000,000
loan note, following the conversion of $3,000,000 of the loan note into equity,
as detailed in Table 1 note 1c. See Note 18 for the impact of the
new loan note. Details of the unamortized discount on the loan are discussed
above in note 16.
18.
Under
US GAAP the new $2,000,000 loan note and the 500,000 warrants have been
accounted for under APB14, so that the proceeds of the loan note have been
allocated between debt and the warrants based on their relative fair values.
The
debt is being accreted up to its face value over the term of the loan note,
with
a corresponding charge to interest expense. The fair value of the warrants
is
being retained in additional paid in capital until such time as they are
exercised, lapse, or are otherwise dealt with. Under UK GAAP the warrants are
regarded as not having affected the finance cost of the loan note.
19.
This
represents the culmination of all adjustments in arriving at the unaudited
pro
forma combined condensed consolidated US GAAP balance sheet.
F-33