When Amarin Corporation Plc (NASDAQ:AMRN) reported 2Q2016 and 1H2016 earnings, the company said that results surpassed internal expectations. In addition, the results exceeded consensus estimates. But it seems that for Amarin to continue posting such improving financial results, it needs to take in more capital.
As such, the company has announced plans to dilute its stock through a secondary public offering of its ADR shares. It is currently not clear how many shares the company plans to offer. Furthermore, the company has not disclosed the pricing of the new shares it is offering to the public.
However, Amarin did say that all of the shares in the proposed offering will be sold by it. In other words, no other shareholder in the company is taking advantage of the secondary public offering to offload their shares in the company.
Without saying how many shares are on offer and at what price, it is currently impossible to estimate how much in proceeds Amarin would raise from the transaction.
But investors are getting the impression that the offering might not take place. The company said in a press release that the proposed equity sale is subject to market conditions and there is a possibility that the offer may not be completed.
The need for cash
Amarin is burning cash funding its various programs. For the six months to June 30, the company sank nearly $16 million into cost of goods sold. In the same period, SG&A expenses consumed $54.1 million and R&D swallowed $26.3 million. All big increases since last year.
Therefore, as the rate of cash burn increases, Amarin has felt the need to raise more cash. In any case, the company’s cash balance fell to just $72.5 million at the end of the latest quarter compared $81.4 million at the end of the previous quarter.
A look at Amarin’s debt position also seems to give justification for an additional capital raise to help the company reduce its balance sheet leverage. Amarin closed the latest quarter with debt of $250.2 million, slightly down from the previous quarter’s $252.9 million but more than $237.3 million in the year ago quarter.
Amarin Corporation posted EPS $0.07 on revenue of $33.1 million in the latest quarter. EPS beat by $0.13 and revenue rose by 87% and beat by $3.14 million.