AMARIN CORP PLC\UK 10-K

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations This Annual Report on Form 10-K contains forward-looking statements concerning future events and our performance. When used in this Annual Report on Form 10-K, the words “may,” “would,” “should,” “could,” “expects,” “aims,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “projects,” “potential,” or “continue” or the negative of these terms or other comparable terminology are included to identify forward-looking statements. These statements include but are not limited to statements regarding the commercial success of VASCEPA and factors that can affect such success; interpretation of court decisions; plans with respect to litigation; expectation on determinations and policy positions of the United States Food and Drug Administration, or U.S. FDA; the safety and efficacy of our product and product candidates; expectation regarding the potential for VASCEPA to be partnered, developed and commercialized outside of the United States; expectation on the scope and strength of our intellectual property protection and the likelihood of securing additional patent protection; estimates of the potential markets for our product candidates; estimates of the capacity of manufacturing and other facilities to support our products; our operating and growth strategies; our industry; our projected cash needs, liquidity and capital resources; and our expected future revenues, operations and expenditures. These forward-looking statements are based on our current expectations and assumptions and many factors could cause our actual results to differ materially from those indicated in these forward-looking statements. You should review carefully the factors identified in this Annual Report on Form 10-K in Item 1A, “Risk Factors”. We disclaim any intent to update or announce revisions to any forward-looking statements to reflect actual events or developments, except as required by law. Except as otherwise indicated herein, all dates referred to in this Annual Report on Form 10-K represent periods or dates fixed with reference to our fiscal year ended December 31, 2023. Overview We are a pharmaceutical company focused on the commercialization and development of therapeutics to improve cardiovascular, or CV, health and reduce CV risk. Our commercialized product, VASCEPA ® (icosapent ethyl) was first approved by the United States, or U.S., Food and Drug Administration, or U.S. FDA, for use as an adjunct to diet to reduce triglyceride, or TG, levels in adult patients with severe (≥500 mg/dL) hypertriglyceridemia, or the MARINE indication and we commercially launched in 2013. On December 13, 2019, the U.S. FDA approved an indication and label expansion for VASCEPA based on the landmark results of our cardiovascular outcomes trial, REDUCE-IT ® , or Reduction of Cardiovascular Events with EPA – Intervention Trial. VASCEPA is the first and only drug approved by the U.S. FDA as an adjunct to maximally tolerated statin therapy for reducing persistent cardiovascular risk in select high risk-patients, or the REDUCE-IT indication. On March 26, 2021, the European Commission, or EC, granted approval of the marketing authorization application in the European Union, or EU, for VAZKEPA ® , hereinafter along with the U.S. brand name VASCEPA, collectively referred to as VASCEPA, which is the first and only EC approved therapy to reduce cardiovascular risk in high-risk statin-treated patients with elevated TG levels. On April 22, 2021, we announced that we received marketing authorization from the Medicines and Healthcare Products Regulatory Agency, or MHRA, for VAZKEPA in England, Wales and Scotland to reduce cardiovascular risk. On June 1, 2023, we announced that regulatory approval from the National Medical Products Administration, or NMPA, for VASCEPA in Mainland China was received by our partner for the MARINE indication. VASCEPA is currently available by prescription in the U.S. and certain other countries throughout the world, as described below. We are responsible for the supply of VASCEPA to all markets in which the branded product is sold, either to and through our collaborations with third-party companies or by us. We are not responsible for providing any generic company with drug product. Geographies outside the United States in which VASCEPA is sold and under regulatory review are not subject to the U.S. patent litigation and judgment described below and no similar litigation is pending outside of the United States. Organizational Restructuring Program On July 18, 2023, we announced that we were implementing a new Organizational Restructuring Program, or the ORP, resulting in the elimination and consolidation of certain roles across our organization, both in the U.S. and abroad, representing a reduction of our total employee base by approximately 30%. The ORP was implemented following a review of our business and to better position the organization for a new strategic focus. We expect the ORP will reduce operating costs by approximately $40.0 million annually. Our refocused strategic priorities and restructuring plan focuses on three core areas: • Maximizing U.S. Cash Flow Through Streamlined Model: We have maintained VASCEPA as a cost-competitive option to generics despite the elimination of all U.S. sales force positions and approximately 30% of non-sales positions. We maintained our managed care and trade organization to support these efforts. We continue to explore innovative approaches to driving revenue to maintain our leadership position in the icosapent ethyl, or IPE, market. • European Redesign: We redesigned our commercial infrastructure in Europe to better align with pricing and reimbursement status, commercial progress to date, as well as streamline certain cross-geographic functions and better leverage learnings across countries. In addition, we will continue to advance our pricing and reimbursement activities to drive access in remaining geographies, including those where progress has been delayed. 69 • Expanding Upon International Partnerships: We continue to work on generating revenue from our partnerships in key international markets, including Canada, MENA, China, South Korea, Australia and New Zealand and will continue to explore additional partnerships. United States VASCEPA is sold principally to a limited number of major wholesalers, as well as selected regional wholesalers and retail and mail order pharmacy providers, or collectively, our distributors or our customers, most of whom in turn resell VASCEPA to retail pharmacies for subsequent resale to patients. Since VASCEPA was made commercially available in 2013, approximately 25 million estimated normalized total prescriptions of VASCEPA have been reported by Symphony Health. In 2020, following our unsuccessful appeals of a court ruling in favor of two generic drug companies, Dr. Reddy’s Laboratories, Inc., or Dr. Reddy’s, and Hikma Pharmaceuticals USA Inc., or Hikma, and certain of their affiliates, several of our patents covering the MARINE indication were declared invalid. As a result, the following generic versions of VASCEPA have obtained U.S. FDA approval with labeling consistent with the MARINE indication and have entered the U.S. market: Company FDA MARINE Indication Approval 1-gram Launch Date 0.5-gram Launch Date Hikma Pharmaceuticals USA Inc. May 2020 November 2020 March 2023 Dr. Reddy’s Laboratories, Inc. August 2020 June 2021 June 2023 Teva Pharmaceuticals USA, Inc. September 2020 January 2023 September 2022 Apotex, Inc. June 2021 January 2022 N/A Zydus Lifesciences April 2023 N/A N/A Strides Pharma September 2023 N/A N/A Epic Pharma December 2023 N/A N/A We obtain data from a third party, Symphony Health, which collects and reports estimates of weekly, monthly, quarterly and annual prescription information. There is a limited amount of information available to determine the actual number of total prescriptions for products like VASCEPA during such periods. The vendor's estimate utilizes a proprietary projection methodology and is based on a combination of data received from pharmacies and other distributors, as well as historical data when actual data is unavailable. Based on data from Symphony Health, the below chart represents the estimated number of normalized total VASCEPA prescriptions. Normalized total prescriptions represent the estimated total number of VASCEPA prescriptions dispensed to patients, calculated on a normalized basis (i.e., one month’s supply, or total capsules dispensed multiplied by the number of grams per capsule divided by 120 grams). Inventory levels at wholesalers tend to fluctuate based on seasonal factors, prescription trends and other factors. The previous calculations of prescription levels by this vendor can change between periods and can be significantly affected by lags in data reporting from various sources or by changes in pharmacies and other distributors providing data. Such methods can from 70 time to time result in significant inaccuracies in information when ultimately compared with actual results. These inaccuracies have historically been most prevalent and pronounced during periods of time of inflections upward or downward in rates of use. Further, data for a single and limited period may not be representative of a trend or otherwise predictive of future results. We are not responsible for the accuracy of this vendor's information and we do not receive prescription data directly from retail pharmacies. Europe In 2021, we received marketing authorization and regulatory approval in the EU, England, Wales and Scotland. Launch of VAZKEPA in individual countries depends on the timing of achieving product reimbursement on a country-by-country basis. To date we have filed 15 dossiers to gain market access in European countries, including in all of the largest countries in Europe. In most European countries, securing product reimbursement is a requisite to launching. In certain countries, such as Denmark, individual patient reimbursement is allowed prior to national reimbursement. In countries where individual price reimbursement is allowed prior to national reimbursement, product can be made available on a patient by patient basis, while the national reimbursements negotiations are ongoing. In all countries, securing adequate reimbursement is a requisite for commercial success of any therapeutic. The time required to secure reimbursement tends to vary from country to country and cannot be reliably predicted. While we believe that we have strong arguments regarding the cost effectiveness of VAZKEPA, the success of such reimbursement negotiations have a significant impact on the assessment of the commercial opportunity of VAZKEPA in Europe. Through the date of this Annual Report, we have received and made VAZKEPA available under individual reimbursement or received national reimbursement and launched commercial operations in the following countries, respectively. Country Individual Reimbursement National Reimbursement Product Availability Launch Date Sweden N/A March 2022 March 2022 March 2022 Finland N/A October 2022 December 2022 December 2022 England/Wales N/A July 2022 October 2022 October 2022 Spain N/A July 2023 September 2023 September 2023 Netherlands N/A August 2023 September 2023 September 2023 Scotland N/A August 2023 August 2023 September 2023 Austria September 2022 N/A September 2022 N/A Denmark June 2022 N/A June 2022 N/A We continue to advance our pricing and reimbursement activities to drive access in remaining geographies, including those where progress has been delayed. We are leveraging third-party relationships for various support activities and are implementing an impactful and cost-effective hybrid commercial model balancing optimally digital and face-to-face approach for more impact and cost efficiency, which is or will be utilized throughout Europe as launches are rolled out. Patients at high-risk for cardiovascular disease tend to be treated more often by specialists, such as cardiologists rather than by general practitioners. Privacy laws and other factors impact the availability of data to inform European commercial operations at an individual physician level. Generally, less data is available and at reduced frequencies than in the United States. However, this greater concentration of at-risk patients being treated by specialists in Europe should allow for more efficient promotion than in the United States. In Europe, VAZKEPA has the benefit of 10 years of market protection, and we have been issued a patent that expires in 2033 with additional pending applications that could extend exclusivity into 2039. Rest of World As discussed above, one of the core areas of focus from our ORP is continuing to work on generating revenue from our partnerships in key international markets, including Canada, MENA, China, Australia and New Zealand and we will continue to explore additional partnerships. China In February 2015, we entered into an exclusive agreement with Eddingpharm (Asia) Macao Commercial Offshore Limited, or Edding, to develop and commercialize VASCEPA capsules in what we refer to as the China Territory, consisting of the territories of Mainland China, Hong Kong, Macau and Taiwan. Edding, with our support, conducted a clinical trial of VASCEPA in China, which evaluated the effect of VASCEPA on patients with very high triglyceride levels (≥500 mg/dL). In November 2020, we announced statistically significant topline positive results from this Phase 3 clinical trial of VASCEPA conducted by Edding. The study, which investigated VASCEPA as a treatment for patients with very high triglycerides (≥500 mg/dL), met its primary efficacy endpoint as defined in the clinical trial protocol and demonstrated a safety profile similar to placebo. There were no treatment-related serious adverse events in this study. On February 9, 2021, we announced that the regulatory review processes in Mainland China and Hong Kong had commenced. On February 23, 2022, the Hong Kong Department of Health completed their regulatory evaluation and approved the use of VASCEPA under the REDUCE-IT indication. In Mainland China, the NMPA accepted for review the new drug 71 application for VASCEPA, submitted by Edding, based on the results from the Phase 3 clinical trial and the results from our prior studies of VASCEPA. In China, on October 10, 2022, following the completion of product testing by the China National Institutes for Food and Drug Control, or NIFDC, the final NMPA review of the VASCEPA NDA was initiated. The Company announced on June 1, 2023 that Edding received approval from NMPA for VASCEPA in Mainland China under the MARINE indication and launched commercially in October 2023. In October 2023, Edding's submission of a regulatory filing to the NMPA for VASCEPA under the REDUCE-IT indication was accepted. Middle East and North Africa (MENA) In March 2016, we entered into an agreement with Biologix FZCo, or Biologix, to register and commercialize VASCEPA in several Middle Eastern and North African countries. Biologix obtained approval of VASCEPA under the MARINE and REDUCE-IT indications, and subsequently launched commercially, in the following countries: Country MARINE REDUCE-IT Launch Date Lebanon March 2018 August 2021 June 2018 United Arab Emirates July 2018 October 2021 February 2019 Qatar December 2019 April 2021 N/A Bahrain April 2021 April 2022 N/A Kuwait December 2021 March 2023 September 2023 Saudi Arabia March 2022 June 2023 September 2023 VASCEPA is under registration in additional countries in the MENA region. Canada In September 2017, we entered into an agreement with HLS Therapeutics Inc., or HLS, to register, commercialize and distribute VASCEPA in Canada. In December 2019, HLS received formal confirmation from Health Canada that the Canadian regulatory authority granted approval for VASCEPA to reduce the risk of cardiovascular events (cardiovascular death, non-fatal myocardial infarction, non-fatal stroke, coronary revascularization or hospitalization for unstable angina) in statin-treated patients with elevated triglycerides, who are at high-risk of cardiovascular events due to established cardiovascular disease, or diabetes, and at least one other cardiovascular risk factor. In January 2020, HLS obtained regulatory exclusivity designation and launched commercially in February 2020. In April 2022, HLS completed negotiations with Canada’s pan-Canadian Pharmaceutical Alliance for the terms and conditions under which VASCEPA would qualify for public market reimbursement in Canada. HLS has obtained reimbursement from all major private and public payors gaining access to a majority of eligible patients in Canada. Coverage of patients with established cardiovascular disease represents a substantial portion of VASCEPA’s approved label in Canada. VASCEPA has the benefit of data protection afforded through Health Canada until the end of 2027, in addition to separate patent protection with expiration dates that could extend into 2039. Other We completed the second year of a three-year plan to submit and obtain regulatory approval in 20 or more additional countries and regions in order to ensure that patients in the top 50 cardiometabolic markets worldwide can benefit from VASCEPA. Through the date of this Annual Report, we have filed for regulatory review in 20 countries and regions and have received approval in 13 countries and regions outside of the United States and European Medicines Agency, or EMA, regulatory approval authority, including in Switzerland, Australia, New Zealand and Israel, under the REDUCE-IT indication. In addition, VAZKEPA has been made available under individual pricing reimbursement in Switzerland. In February 2023, the Company entered into an agreement with CSL Seqirus, or CSL, to secure pricing and reimbursement, commercialize and distribute VAZKEPA in Australia and New Zealand. In July 2023, the Company entered into an agreement with Lotus Pharmaceuticals to commercialize and distribute VAZKEPA in South Korea and nine countries in Southeast Asia. In August 2023, the Company entered into an agreement with Neopharm (Israel) 1996 Ltd., or Neopharm, to distribute VAZKEPA in Israel, Gaza, West Bank, and the territories of the Palestinian Authority. The Company will be responsible for supplying finished product to these partners. We continue to assess other potential partnership opportunities for VASCEPA with companies outside of the United States and Europe with the intention of partnering in all other international markets where VASCEPA receives local regulatory approval. 72 Research and Development Since its inception in 2011, conduct of the REDUCE-IT cardiovascular outcomes study of VASCEPA has been the centerpiece of our research and development. Most of our other research and development during this period also pertained to VASCEPA, including study of the mechanism of action of the single active ingredient in VASCEPA, icosapent ethyl. Based on the final positive results of REDUCE-IT, we sought additional indicated uses for VASCEPA in the United States and continue to pursue approval for VASCEPA around the world. We also anticipate continuing to publish additional details of the REDUCE-IT study to address scientific interest beyond the primary results of this study derived from the over 35,000 patient years of study experience which were accumulated in the REDUCE-IT study. Based on REDUCE-IT results, as of the date of the filing of this Annual Report on Form 10-K, more than 40 clinical treatment guidelines, consensus statements or scientific statements from medical societies or journals have been updated recommending the use of icosapent ethyl in appropriate at-risk patients, including those statements which we were informed of by our global partners in Canada, China and the Middle East as well as guidelines which were newly received during the fourth quarter of 2023 as listed below: • In December 2023, the Hellenic Atherosclerosis Society published guidelines for the diagnosis and treatment of dyslipidemia. The publication stated that clinical trials and meta-analyses have not shown that increasing consumption of omega-3 PUFA decreases the risk of atherosclerotic cardiovascular disease, or ASCVD, except for IPE. Based on the findings of REDUCE-IT, IPE (at a dose of 2 g twice daily) should be added in combination with a statin (and fenofibrate if needed) for patients with type 2 diabetes and established ASCVD or with ≥1 major risk factor and TG >150 mg/dL. • The Cardiological Society of India released clinical practice guidelines for dyslipidemia management in December 2023. The guidelines state that in patients with mild to moderate hypertriglyceridemia (TG 150–499 mg/dL), there is no role for fibric acid derivatives. In those with diabetes (≥40 years of age) or ASCVD, IPE may be considered if TG remains high after lifestyle changes and diabetes control have been achieved. In addition, the guidelines not that the REDUCE-IT randomized controlled trial of highly purified IPE showed significant reduction of MACE. During 2023, we announced the following data which added to our growing body of knowledge on VASCEPA as a result of our continued analysis of the REDUCE-IT trial results: • In March 2023, a new prespecified and post hoc exploratory analysis of REDUCE-IT, presented at the American College of Cardiology scientific session, found VASCEPA significantly reduced the risk of first cardiovascular death, strokes, heart attacks, coronary revascularization or unstable angina in a subgroup of patients with recent (<12 months) acute coronary syndrome by 37% (HR 0.63; 95% CI, 0.48-0.84, p=0.002). • In April 2023, the EVAPORATE- FFRCT study was published online in the European Heart Journal - Cardiovascular Imaging. This subgroup analysis assessed the impact of VASCEPA on coronary physiology assessed by fractional flow reserve derived from coronary CTA data sets, or FFRCT, using imaging data from EVAPORATE. FFRCT has been associated with various clinical outcomes, such as the safe deferral of invasive coronary angiography, cardiovascular death or myocardial infarction, and revascularization. This study is the first assessment of FFRCT to determine drug effect, and there was significant improvement in the pre-specified primary endpoint of FFRCT value in the distal coronary segment from baseline to follow-up in the most diseased vessel per patient using VASCEPA compared with placebo. VASCEPA improved mean distal segment FFRCT at 9- and 18-months follow-up compared with placebo (P = 0.02, P = 0.03 respectively). The secondary endpoint, change in translesional FFRCT (change in FFRCT across the most severe (minimum 30%) diameter stenosis) coronary lesion per vessel was improved with VASCEPA treatment compared with placebo, although it was not statistically significant (P = 0.054). • In August 2023, we supported research that was presented at the ESC Congress, both onsite and online in Amsterdam. This new research included, along with other topics, the REDUCE-IT mediation analysis report of the contribution of IPE and other biomarkers to MACE reduction. In total, Amarin and global medical and scientific collaborators supported close to 50 publications inclusive of accepted abstracts, posters, and manuscripts. Commercial and Clinical Supply We manage the manufacturing and supply of VASCEPA and rely on contract manufacturers in each step of our commercial and clinical product supply chain. These steps include active pharmaceutical ingredient, or API, manufacturing, encapsulation of the API, product packaging and supply-related logistics. Our approach to product supply procurement is designed to mitigate risk of supply interruption and maintain an environment of cost competition through diversification of contract manufacturers at each stage of the supply chain and lack of reliance on any single supplier. We have multiple U.S. FDA-approved international API suppliers, encapsulators and packagers to support the VASCEPA commercial franchise. We also have multiple international API suppliers, encapsulators and packagers to support the commercialization of VASCEPA in geographies where the drug is approved outside the 73 United States. Not all of our suppliers approved by the U.S. FDA are approved in every other geography. The regulatory process generally requires extensive details as part of the submission provided to a country or region in connection with a company's request for regulatory approval. Suppliers must be specifically identified as part of the submission for qualification and approval for commercialization in a country or region. As a result, only supply, as approved, may be used in finished goods available for sale in a specific country or region. The amount of supply we seek to purchase in future periods will depend on the level of growth of VASCEPA revenues and minimum purchase commitments with certain suppliers. Beginning in 2022, we reviewed our contractual supplier purchase obligations and began taking steps to amend supplier agreements to align supply arrangements with current and future market demand, while we decrease our current inventory levels primarily related to North America approved inventory. As of December 31, 2023, we had inventory of $336.2 million, of which 80% is inventory approved for use in North America. We continue to negotiate with our contract suppliers to align our supply arrangements with current and future global market demand. Financial Operations Overview Product revenue, net. All of our product revenue is derived from product sales of 1-gram and 0.5-gram size capsules of VASCEPA, net of allowances, discounts, incentives, rebates, chargebacks and returns. In the United States, VASCEPA is sold to three major wholesalers, as well as several regional wholesalers along with mail order pharmacy providers, or collectively, our distributors or our customers. Most of these customers resell VASCEPA to retail pharmacies for purposes of dispensing VASCEPA to patients. Revenues from VASCEPA sales are recognized upon delivery to the distributor or customer. Timing of shipments to wholesalers, as used for revenue recognition, and timing of prescriptions as estimated by third-party sources such as Symphony Health may differ from period to period. During the years ended December 31, 2023 and 2022, our product revenue, net included adjustment for co-pay mitigation rebates provided by us to commercially insured patients in the United States. Outside of the United States, currently the majority of our product revenue is derived from the sales of VASCEPA to our commercial partners based on the net price for VASCEPA established in our contracts with such partners. These commercial partners then resell the product in their agreed commercial territory. Revenues from sales to our international commercial partners are recognized when the commercial partners obtain control of our product. The net price of VASCEPA sold by us to our customers where we directly sell VASCEPA is generally significantly higher than the net price of VASCEPA that we sell to commercial partners who then incur the cost of promoting and reselling the product in their territories. As a result, even when the net price of VASCEPA to patients is similar in various parts of the world, our gross margin on sales is higher where we sell VASCEPA directly. We also derive product revenue from sales of our product to a limited number of wholesalers in Europe, most of whom in turn resell the product to pharmacies for purposes of their reselling the product to fill patient prescriptions. Licensing and royalty revenue. Licensing and royalty revenue currently consists of revenue attributable to receipt of up-front, non-refundable payments, milestone payments and sales-based payments related to license and distribution agreements for VASCEPA outside the United States. We recognize revenue from licensing arrangements as we fulfill the performance obligations under each of the agreements. Cost of goods sold. Cost of goods sold includes the cost of API for VASCEPA on which revenue was recognized during the period, as well as the associated costs for encapsulation, packaging, shipment, supply management, quality assurance, insurance, and other indirect manufacturing, logistics and product support costs. The cost of the API included in cost of goods sold reflects the average cost method of inventory valuation and relief. This average cost reflects the actual purchase price of VASCEPA API. Our cost of goods sold is not materially impacted by whether we sell VASCEPA directly in a country or we sell VASCEPA to a commercial partner for resale in a country. In the years ended December 31, 2023 and 2022, we incurred costs within Cost of goods sold - restructuring inventory related to steps taken to amend supplier agreements to align supply arrangements with current and future market demand. Selling, general and administrative expense. Selling, general and administrative expense consists primarily of salaries and other related costs, including stock-based compensation expense, for personnel in our sales, marketing, executive, business development, finance and information technology functions. Other costs primarily include facility costs and professional fees for accounting, consulting and legal services. Research and development expense. Research and development expense consists primarily of fees paid to professional service providers in conjunction with independent monitoring of our clinical trials and acquiring and evaluating data in conjunction with our clinical trials, fees paid to independent researchers, costs of qualifying contract manufacturers, services expenses incurred in developing and testing products and product candidates, salaries and related expenses for personnel, including stock-based compensation expense, costs of materials, depreciation, rent, utilities and other facilities costs. In addition, research and development expenses include the cost to support current development efforts, costs of product supply received from suppliers when such receipt by us is prior to regulatory approval of the supplier, as well as license fees related to our strategic collaboration with Mochida. We expense research and development costs as incurred. 74 Restructuring expense. Restructuring expense consists of restructuring costs incurred under our July 2023 ORP, June 2022 Cost Reduction Plan, or CRP, and August 2022 discontinuation of German operations, which consists of severance pay, incentive compensation, insurance benefits, stock-based compensation expense and other contract related costs. Interest income, net and other income (expense), net. Interest income, net consists primarily of interest earned on our cash and cash equivalents, as well as our short-term and long-term investments. Other income (expense), net, consists of the Employee Retention Credit, or ERC, awarded as part of the Coronavirus Aid, Relief and Economic Stabilization Act, or CARES Act, and foreign exchange losses and gains as well as sublease income. Income tax provision. Income tax provision, deferred tax assets and liabilities, and reserves for unrecognized tax benefits reflect management’s best assessment of estimated future taxes to be paid. We are subject to income taxes in both the United States and foreign jurisdictions. In applying guidance prescribed under ASC 740 and based on present evidence and conclusions around the realizability of deferred tax assets, we determined that any tax benefit related to the pretax losses generated for the year-ended December 31, 2023 and 2022, are not more likely than not to be realized. Critical Accounting Policies and Significant Judgments and Estimates Our discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements and notes, which have been prepared in accordance with accounting principles generally accepted in the United States, or GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses. On an ongoing basis, estimates are assessed and adjusted based on historical experience and current market-specific indicators, environment and assumptions. Actual results may differ from these estimates under different assumptions or conditions. A summary of our critical accounting policies, significant judgments and estimates is presented in Note 2—Significant Accounting Policies to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K. We believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of our consolidated financial statements. Revenue Recognition —In accordance with GAAP, under Accounting Standards Codification, or ASC, Topic 606, Revenue from Contracts with Customers , which we adopted on a modified retrospective basis effective January 1, 2018, revenue is recognized when product has been delivered to the wholesaler, in an amount that reflects the consideration which we expect to receive in exchange for those goods or services. To determine revenue recognition for arrangements that we determine are within the scope of Topic 606, we perform the following five steps: (i) identify the contract(s) with a Distributor; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) we satisfy a performance obligation. We apply the five-step model to contracts only when it is probable that we will collect the consideration we are entitled to in exchange for the goods or services we transfer to the Distributor. At contract inception, once the contract is determined to be within the scope of Topic 606, we assess the goods or services promised within each contract, determine those that are performance obligations and assess whether each promised good or service is distinct. We then recognize as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied. We recognized total revenue, net of $306.9 million and $369.2 million during the years ended December 31, 2023 and 2022, respectively, of which $285.3 million and $366.5 million, respectively, was based on product revenue sales. For a complete discussion of our accounting for net product revenue, licensing and royalty revenues, which make up Total revenue, net, see Note 2—Significant Accounting Policies. We have written contracts with our distributors, and transfer of control typically occurs upon delivery of our product to the Distributor. We evaluate the creditworthiness of each of our distributors to determine whether revenues can be recognized upon delivery, subject to satisfaction of the other requirements, or whether recognition is required to be delayed until receipt of payment. We calculate gross product revenues based on the wholesale acquisition cost charged to our distributors for VASCEPA. We estimate our Product revenue, net by deducting from our gross product revenues (a) trade allowances, such as invoice discounts for prompt payment and distributor fees, (b) estimated government and private payor rebates, chargebacks and healthcare discounts, such as Medicaid reimbursements, (c) expected product returns and (d) estimated costs of incentives offered to certain indirect customers, including patients. The gross to net deductions are estimated based on available actual prescription data, historical industry trends, and levels of inventory in the distribution channel. We rely on resale data provided by our distributors as well as prescription data provided by Symphony Health and IQVIA in estimating the level of inventory held in the distribution channel. A hypothetical 5% change in estimated aggregate bottles of channel inventory would result in a change of less than 1% in net product revenues reported during the years ended December 31, 2023 and 2022. When evaluating licensing arrangements, we perform the following steps: (i) identification of the promised goods or services in the contract; (ii) determination of whether the promised goods or services are performance obligations including whether they are distinct in the context of the contract; (iii) measurement of the transaction price, including the constraint on variable consideration; (iv) allocation of the transaction price to the performance obligations; and (v) recognition of revenue when (or as) we satisfy each 75 performance obligation. In determining performance obligations, we evaluate whether the license is distinct from the other performance obligations with the collaborative partner based on the consideration of the relevant facts and circumstances for each arrangement. Factors considered include the stage of development of the license delivered, research and development capabilities of the partner and the ability of partners to develop and commercialize VASCEPA independent of us. If the license to our intellectual property is determined to be distinct from the other performance obligations identified in the arrangement, we recognize revenues from non-refundable, up-front fees allocated to the license when the license is transferred to the Distributor and the Distributor is able to use and benefit from the license. For licenses that are bundled with other promises, we utilize judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress for purposes of recognizing revenue from non-refundable, up-front fees. We evaluate the measure of progress each reporting period and, if necessary, adjust the measure of performance and related revenue recognition. At the inception of each arrangement that includes development, regulatory and commercial milestone payments, we evaluate whether the milestones are considered probable of being reached and estimate the amount to be included in the transaction price using the most likely amount method. If it is probable that a significant revenue reversal would not occur, the associated milestone value is included in the transaction price. Milestone payments that are not within our control or the control of the licensee, such as regulatory approvals, are not considered probable of being achieved until those approvals are received. We evaluate factors such as the scientific, clinical, regulatory, commercial and other risks that must be overcome to achieve the respective milestone as well as the level of effort and investment required. The transaction price is then allocated to each performance obligation on a relative stand-alone selling price basis, for which we recognize revenue as or when the performance obligations under the contract are satisfied. At the end of each subsequent reporting period, we re-evaluate the probability of achievement of such development, regulatory and commercial milestones and any related constraint, and if necessary, adjust its estimate of the overall transaction price. Any such adjustments are recorded on a cumulative catch-up basis, which would affect licensing revenues and earnings in the period of adjustment. We receive payments from our customers based on billing schedules established in each contract. Upfront payments and fees are recorded as deferred revenue upon receipt or when due and may require deferral of revenue recognition to a future period until we perform our obligations under these arrangements. Amounts are recorded as accounts receivable when our right to consideration is unconditional. We do not assess whether a contract has a significant financing component if the expectation at contract inception is such that the period between payment by the customer and the transfer of the promised goods or services to the customer will be one year or less. Income Taxes —Deferred tax assets and liabilities are recognized for the future tax consequences of differences between the carrying amounts and tax bases of assets and liabilities and operating loss carryforwards and other attributes using enacted rates expected to be in effect when those differences reverse. Valuation allowances are provided against deferred tax assets that are not more likely than not to be realized. We provide reserves for potential payments of tax to various tax authorities or do not recognize tax benefits related to uncertain tax positions and other issues. Tax benefits for uncertain tax positions are based on a determination of whether a tax benefit taken by us in our tax filings or positions is more likely than not to be realized, assuming that the matter in question will be decided based on its technical merits. Our policy is to record interest and penalties in the provision for income taxes. We assess our ability to realize deferred tax assets at each reporting period. The realization of deferred tax assets depends on generating future taxable income during the periods in which the tax benefits are deductible or creditable. When making our assessment about the realization of our deferred tax assets as of December 31, 2023, we considered all available evidence, placing particular weight on evidence that could be objectively verified. The evidence considered included the (i) historical taxable profitability of our U.S. operations, (ii) historical pre-tax book loss position, (iii) sources of future taxable income, giving weight to sources according to the extent to which they can be objectively verified, (iv) the provisions of the Tax Cuts and Jobs Act enacted in 2017 and their impact on our future taxable income, and (v) the risks to our business related to the commercialization and development of VASCEPA. Based on our assessment, we concluded that all of our net deferred tax assets are not more likely than not to be realizable as of both December 31, 2023 and 2022. Changes in historical earnings performance, future earnings projections, and changes in tax laws and tax rates, among other factors, may cause us to adjust our valuation allowance on deferred tax assets in the future, which would impact our income tax expense in the period in which we determine that these factors have changed. We intend to maintain the valuation allowance until sufficient positive evidence exists to conclude that it is more likely than not that our deferred tax benefits will be realized. We will continue to monitor the need for valuation allowances in each jurisdiction and may adjust our positions in the future. Excess tax benefits and deficiencies that arise upon vesting or exercise of share-based payments are recognized as an income tax benefit and expense, respectively, in the consolidated statement of operations. 76 Recent Accounting Pronouncements For a discussion of recent accounting pronouncements, see Note 2—Significant Accounting Policies in the accompanying Notes to Consolidated Financial Statements in this Annual Report on Form 10-K. Effects of Inflation We believe the impact of inflation on operations has been minimal during the past three years. Results of Operations The discussion that follows includes a comparison of our results of operations and liquidity and capital resources for fiscal years 2023 and 2022. For a comparison of our results of operations and financial condition for fiscal years 2022 and 2021, see “Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our 2022 Annual Report on Form 10-K, filed with the SEC on March 1, 2023 . Comparison of Fiscal Years Ended December 31, 2023 and December 31, 2022 Total revenue, net. We recorded total revenue, net, of $306.9 million and $369.2 million during the years ended December 31, 2023 and 2022, respectively, a decrease of $62.3 million, or 17%. Total revenue, net consists primarily of revenue from the sale of VASCEPA in the United States. In addition to the United States, we also sell VASCEPA by prescription in certain countries in Europe as well as certain countries outside of the United States and Europe, such as China and Canada, through collaborations with third-party companies. As further discussed below, the aforementioned decrease consists of an $86.0 million decrease in U.S. net product revenue, offset by increases of $18.9 million in licensing and royalty revenue and $4.7 million in net product revenue from sales of VASCEPA outside of the United States. Product revenue, net. We recorded product revenue, net, of $285.3 million and $366.5 million during the years ended December 31, 2023 and 2022, respectively, a decrease of $81.2 million, or 22%. This decrease was due primarily to a 24% decrease in VASCEPA sales in the United States. We recorded U.S. product revenue, net, of $273.9 million and $359.9 million for the years ended December 31, 2023 and 2022, respectively. This decrease was primarily due to a decline in net selling price as a result of the impact from an increase in generic competition in the market, offset by an adjustment primarily related to Medicaid rebates of $15.1 million. During the year ended December 31, 2023 there were four generics in the market. During the majority of the year ended December 31, 2022 there were three generics in the market. The overall icosapent ethyl market in the United States, based on prescription levels reported by Symphony Health, increased for the year ended December 31, 2023 by 4% as compared to the year ended December 31, 2022. Our share of the icosapent ethyl market has decreased to approximately 57% in the year ended December 31, 2023 from approximately 60% in the year ended December 31, 2022. Additionally, based on prescription levels reported by Symphony Health, VASCEPA branded prescriptions decreased by 8% in the year ended December 31, 2023 as compared to the year ended December 31, 2022. In Europe, we recorded product revenue, net of $3.3 million and $2.6 million as of December 31, 2023 and 2022, respectively. Revenue in 2023 was primarily related to sales in the U.K. and Spain, whereas 2022 was primarily related to sales in Germany, from which we subsequently withdrew in the third quarter of 2022. For the year ended December 31, 2023, we recorded $8.1 million of product revenue, net, to our collaboration partners compared to $4.1 million during the year ended December 31, 2022. Despite the generic competition in the U.S., we remain confident that the global patient need for VASCEPA is high. In 2024, we will continue to focus on extending the lifecycle of VASCEPA in the U.S., obtaining pricing reimbursement and launching commercial operations in all remaining European markets as well as supporting our partners to advance access and growing commercial operations throughout the rest of the world. Licensing and royalty revenue. Licensing and royalty revenue during the years ended December 31, 2023 and 2022 was $21.6 million and $2.7 million, respectively, an increase of $18.9 million, or 706%. The increase is primarily due to the recognition of previously deferred milestone and upfront payments relating to Edding and HLS due to a change in the estimates in which we previously recognized revenue as well as recognition of regulatory milestones achieved during the year. Licensing and royalty revenue relates to the recognition of amounts received in connection with the following VASCEPA licensing agreements: • Edding – a $15.0 million upfront payment received in February 2015, a $1.0 million milestone payment achieved in March 2016 following submission of the clinical trial application to the Chinese regulatory authority, a $5.0 million milestone payment achieved in June 2023 following NMPA approval of VASCEPA under the MARINE indication, 77 and a $3.0 million milestone payment achieved in October 2023 following a regulatory submission to the NMPA for VASCEPA under the REDUCE-IT indication. • HLS – a $5.0 million upfront payment which was received upon closing of the agreement in September 2017, a $2.5 million milestone payment that was received following achievement of the REDUCE-IT trial primary endpoint in September 2018, a $2.5 million milestone payment that was received following U.S. FDA approval of a new indication and label expansion in December 2019, and a $3.8 million milestone payment that was received as a result of obtaining a regulatory exclusivity designation in January 2020. • CSL – a $0.5 million upfront payment which was received upon closing of the agreement in January 2023. • Lotus – a $0.3 million upfront payment which was received upon closing of the agreement in August 2023. The upfront and milestone payments from Edding and HLS are being recognized over the estimated period in which we are required to provide regulatory and development support pursuant to the agreements. The upfront payment from CSL and Lotus are recognized upon closing the agreement as no regulatory and development support is required pursuant to the agreement. The amount of licensing and royalty revenue is expected to vary from period to period based on timing of milestones achieved and changes in estimates of the timing and level of support required. During the second quarter of 2023, the performance period for Edding and HLS was reevaluated and adjusted, resulting in the Company recognizing an additional $5.0 million and $5.3 million, respectively, in license revenues related to this change in estimate for the year ended December 31, 2023. For additional information over the change in estimate refer to Note 13 - Development, Commercialization and Supply Agreements. As part of our licensing agreements with certain territories outside of the United States, we are entitled to a percentage of revenue earned based on sales by our partners. The royalty payments are being recognized as earned based on revenue recognized by our current partners. Cost of goods sold. Cost of goods sold during the years ended December 31, 2023 and 2022 was $141.4 million and $126.7 million, respectively, an increase of $14.7 million, or 12%. Cost of goods sold includes the cost of API for VASCEPA on which revenue was recognized during the period, as well as the associated costs for encapsulation, packaging, shipment, supply management, insurance and quality assurance. The cost of the API included in cost of goods sold reflects the average cost of API included in inventory. This average cost reflects the actual purchase price of VASCEPA API. During 2023 and 2022, we have taken steps to amend supplier agreements to align supply arrangements with current and future demand resulting in charges of $39.2 million and $18.1 million, respectively, which were recorded as cost of goods sold - restructuring inventory. During 2023, approximately $5.1 million of inventory was expensed through cost of goods sold due to both product dating and non-product dating unsellable inventory. During 2022, approximately $9.6 million of inventory was expensed through cost of goods sold not due to product dating unsellable inventory. The API included in the calculation of the average cost of goods sold during the years ended December 31, 2023 and 2022 was sourced from multiple API suppliers. These suppliers compete with each other based on cost, consistent quality, capacity, timely delivery and other factors. In the future, we may see the average cost of supply change based on numerous potential factors including increased volume purchases, continued improvement in manufacturing efficiency, the mix of purchases made among suppliers, currency exchange rates and other factors. The average cost may be variable from period to period depending upon the timing and quantity of API purchased from each supplier. Our overall gross margin on product sales for the years ended December 31, 2023 and 2022 was 50% and 65%, respectively. Excluding the restructuring inventory and inventory write-off charges, gross margin was 66% and 73% for the years ended December 31, 2023 and 2022, respectively. The remaining decrease in gross margin is primarily as a result of a decrease in net selling price. Selling, general and administrative expense. Selling, general and administrative expense for the years ended December 31, 2023 and 2022 was $199.9 million and $304.4 million, respectively, a decrease of $104.5 million, or 34%. Selling, general and administrative expenses for the years ended December 31, 2023 and 2022 are summarized in the table below: Year Ended December 31, In thousands 2023 2022 Selling expense (1) $ 111,326 $ 185,614 General and administrative expenses (2) 76,119 96,462 Non-cash stock-based compensation expense (3) 12,493 22,340 Total selling, general and administrative expense $ 199,938 $ 304,416 (1) Selling expense for the years ended December 31, 2023 and 2022 was $111.3 million and $185.6 million, respectively, a decrease of $74.3 million, or 40%. This decrease is primarily due to a reduction in costs from the elimination of our U.S. sales 78 force as part of our ORP and previous cost reduction plans which also led to a decrease in promotional initiatives and reduced travel. (2) General and administrative expense for the years ended December 31, 2023 and 2022 was $76.1 million and $96.5 million, respectively, a decrease of $20.3 million, or 21%. This decrease is primarily due to a decrease in employee-related costs as a result of the reduction in force from the ORP and previous cost reduction plans as well as a decrease in branded pharma fees as a result of lower sales due to additional generic entrants in the market. The decrease in general and administrative expense was offset by advisory fees related to the 2023 shareholder's special meeting. (3) Non-cash stock-based compensation expense for the years ended December 31, 2023 and 2022 was $12.5 million and $22.3 million, respectively, a decrease of $9.8 million, or 44%. Non-cash stock-based compensation expense represents the estimated costs associated with equity awards issued to internal personnel supporting our selling, general and administrative functions. The decrease is due to the reversal of expense associated with the resignation of our former board members and our former CEO, the ORP announced in July 2023, as well as certain performance-based awards as it was no longer deemed probable that the performance criteria for vesting would be achieved within the required timeframe. As part of our ORP announced in July 2023, we have redesigned our commercial infrastructure in Europe to better align with pricing and reimbursement status, commercial progress to date, as well as streamline certain cross-geographic functions. In addition, we are continuing to advance our pricing and reimbursement activities to drive access in remaining geographies, as well as advancing regulatory filings internationally and focusing on maximizing U.S. cash flow through a streamlined model. We will continue to evaluate all of our spending commitments and priorities based on our refocused strategic priorities and restructuring plan. Research and development expense. Research and development expense for the years ended December 31, 2023 and 2022 was $22.2 million and $30.4 million, respectively, a decrease of $8.2 million, or 27%. Research and development expenses for the years ended December 31, 2023 and 2022 are summarized in the table below: Year Ended December 31, In thousands 2023 2022 REDUCE-IT study (1) $ 1,020 $ 1,724 Fixed-dose combination (2) 1,395 5,777 Regulatory filing fees and expenses (3) 966 1,959 Internal staffing, overhead and other (4) 14,651 16,486 Research and development expense, excluding non-cash expense 18,032 25,946 Non-cash stock-based compensation expense (5) 4,187 4,465 Total research and development expense $ 22,219 $ 30,411 (1) The decrease in expenses for the REDUCE-IT study is primarily driven by incremental efficiencies applied to ongoing analyses performed on the REDUCE-IT cardiovascular outcomes trial data, further leveraging existing internal resources compared to outsourced support. (2) The decrease in fixed-dose combination expenses is primarily due to initial start-up and other costs beginning in 2022 associated with planning and development of the fixed-dose combination of VASCEPA and a statin. The development of the fixed-dose combination was deprioritized during 2023 after it became clear that it would not drive short-term value. (3) The decrease in regulatory filing fees is primarily related to higher spend in 2022 relating to the preparation, submission, and review defense of regulatory filings for several countries. The Company has not prepared nor submitted as many regulatory filings in 2023 as in the previous year. (4) Internal staffing, overhead and other research and development expenses primarily relate to the costs of our personnel employed to manage research, development and regulatory affairs activities and related overhead costs including consulting and other professional fees that are not allocated to specific projects, including costs associated with securing and maintaining regulatory approvals for VAZKEPA in Europe as originally achieved in 2021, as well as regulatory expansion in other countries throughout 2023. Also included are costs related to qualifying suppliers and costs associated with various other activities, including other costs in collaboration with Mochida and pilot studies regarding VASCEPA. (5) Non-cash stock-based compensation expense represents the estimated costs associated with equity awards issued to personnel supporting our research and development and regulatory functions. The decrease is due to the reversal of expense associated with certain performance-based awards as it was no longer deemed probable that the performance criteria for vesting would be achieved within the required timeframe. We continuously evaluate all of our spending commitments and priorities and we plan to adjust our level of research and development activities based on various factors, including the impact of U.S. generic competition as well as timing of pricing reimbursements throughout Europe. 79 Restructuring expense . Restructuring expense for the years ended December 31, 2023 and 2022 was $11.0 million and $13.5 million, respectively, a decrease of $2.6 million, or 19%. The charge in the current year is due to the implementation of the ORP which was approved in the second quarter 2023 and announced on July 18, 2023, which resulted in a reduction of our entire U.S. sales field force, with our managed care and trade organization continuing to support our U.S. commercial efforts, as well as a reduction of approximately 30% of non-sales positions. The prior year charge was the result of the implementation of the CRP announced on June 6, 2022, which primarily related to the reduction of our U.S. field force from approximately 300 sales representatives to approximately 75 sales representatives, as well as the discontinuation of the German operations announced on August 19, 2022. Refer to Note 2 Significant Accounting Policies for additional information. Interest income, net. Interest income, net for the years ended December 31, 2023 and 2022 was $11.9 million and $2.8 million, respectively, an increase of $9.1 million, or 323%. Interest income, net, represents income earned on cash and investment balances. The increase is primarily due to higher interest rates in the current year period compared to the prior year period. Other income (expense), net . Other income (expense), net, for the year ended December 31, 2023 and 2022 was income of $2.1 million and expense of $0.7 million, respectively, an increase of $2.8 million or 379%. Other income (expense), net, primarily consists of the ERC awarded as part of the CARES Act, gains and losses on foreign exchange transactions and sublease income related to our Bridgewater, NJ facility. Provision for income taxes . Provision for income taxes for the year ended December 31, 2023 and 2022 was $5.4 million and $2.0 million, respectively. The increase in the provision for income taxes is due to a change in geographic mix of pre-tax income. On August 16, 2022, the Inflation Reduction Act of 2022, or the Act, was signed into law by the Biden Administration, with tax provisions effective January 1, 2023 primarily focused on implementing a 15% minimum tax on global adjusted financial statement income (CAMT) and a 1% excise tax on share repurchases. We do not expect either of these provisions to have a material impact on our financial results, including the impact from our share repurchase program announced in January 2024. Liquidity and Capital Resources As of December 31, 2023, our aggregate sources of liquidity include cash and cash equivalents and restricted cash of $199.8 million and short-term investments of $121.4 million. We have no indebtedness. Our cash and cash equivalents primarily include checking accounts and money market funds with original maturities of less than 90 days. Our short-term investments consist of securities that will be due in one year or less. We invest cash in excess of our immediate requirements, in accordance with our investment policy, which limits the amounts we may invest in any one type of investment and requires all investments held by us to maintain minimum ratings from Nationally Recognized Statistical Rating Organizations so as to primarily achieve our goals of liquidity and capital preservation. Our cash flows from operating, investing and financing activities, as reflected in the consolidated statements of cash flows, are summarized in the following table: Year Ended December 31, In millions 2023 2022 2021 Cash provided by (used in): Operating activities $ 6.9 $ (180.1 ) $ (66.5 ) Investing activities (25.5 ) 175.3 104.1 Financing activities 0.2 (0.4 ) (5.1 ) (Decrease) increase in cash and cash equivalents and restricted cash $ (18.4 ) $ (5.2 ) $ 32.5 Net cash provided by operating activities increased during 2023 as compared to net cash used in operating activities during the same period in 2022. This is primarily as a result of higher costs in 2022 associated with commercial and pre-launch operations in Europe as well as higher inventory purchases in the first half of 2022, offset by a decrease in U.S. product revenue in 2023. Net cash used in investing activities decreased during the year ended December 31, 2023 compared to net cash provided by investing activities during the same period in 2022. This is primarily due to the purchase of investment grade interest bearing instruments of $215.1 million partially offset by $190.1 million from proceeds from the maturity of investment grade interest bearing instruments, as compared to the same period in 2022 where proceeds from the maturity of investment grade interest bearing instruments was $257.5 million, partially offset by $81.6 million in purchases of investment grade interest bearing instruments. Net cash provided by financing activities increased during the years ended December 31, 2023 compared to net cash used in financing activities during the same period in 2022, primarily as a result of an increase in proceeds related to stock option exercises, offset by taxes paid related to stock-based awards 80 As of December 31, 2023, we had net accounts receivable of $133.6 million, current inventory of $258.6 million and long-term inventory of $77.6 million. We have incurred annual operating losses since our inception and, as a result, we had an accumulated deficit of $1.6 billion as of December 31, 2023. We anticipate that quarterly net cash outflows in future periods will continue to be variable as a result of the timing of certain items, including our purchases of API, the generic competition in the United States and pricing and reimbursement of VAZKEPA in Europe. In July 2023, we announced that we were implementing an ORP resulting in the elimination and consolidation of certain roles across the organization, both in the United States and abroad, representing a reduction of our total employee base by approximately 30%. In the U.S., all sales force positions were eliminated, with the managed care and trade organization continuing to support U.S. commercial efforts, and 30% of non-sales positions were eliminated. In Europe, we have redesigned our commercial infrastructure to better align with pricing and reimbursement status, commercial progress to date, as well as streamlining certain cross-geographic functions and better leveraging learnings across countries. We expect these actions will reduce operating costs by approximately $40.0 million annually. On January 10, 2024, we announced plans to initiate a share repurchase program to purchase up to $50.0 million of the Company's ordinary shares held in the form of American Depository Shares. The implementation of the share repurchase program will require shareholder approval as well as UK High Court approval, as required under UK company law. As of December 31, 2023, we had cash and cash equivalents of $199.3 million and short-term investments of $121.4 million. In accordance with ASC 205-40, management is required to evaluate our ability to continue as a going concern for at least one year after the date the financial statements are issued. We believe that our cash and cash equivalents and our short-term investments will be sufficient to fund our projected operations, including the share repurchase program, for at least one year from the issuance date of our audited consolidated financial statements included elsewhere in this Annual Report and is adequate to support continued operations based on our current plans. We have based this estimate on assumptions that may prove to be wrong, including as a result of the risks discussed under Part II, Item IA, “Risk Factors”, and we could use our capital resources sooner than we expect or fail to achieve positive cash flow. We do not have any special purpose entities or other off-balance sheet arrangements. Item 7A. Quantitative and Qualitat ive Disclosures about Market Risk We are exposed to market risks, which include changes in interest rates. We do not use derivative financial instruments in our investment portfolio, and we do not enter into foreign exchange contracts. Our investments meet high credit quality and diversification standards, as specified in our investment policy. Foreign Currency Exchange Risk. Our results of operations and cash flows are subject to fluctuations due to changes in the Euro, Sterling, Swiss Franc and Yen. The majority of cash and cash equivalents, investments, and the majority of our vendor relationships are denominated in U.S. dollars. We therefore believe that the risk of a significant impact on our operating income from foreign currency fluctuations is not substantial. All of our investments are held in U.S. dollars. We maintain a small amount of our cash and cash equivalents in Euro and from time to time, maintain a small amount of our cash and cash equivalents in other currencies. We purchase a portion of our supply based on a U.S. dollar to Euro exchange rate and, as such, remain subject to currency fluctuation risk for such purchases. Based on the size of our international operations and the amount of our expenses denominated in foreign currencies, currency fluctuation would not have a material effect on our financial position or results of operations. We believe the impact of inflation on operations has been minimal during the past three years. Interest Rate Risk. We believe that we are not exposed to significant interest rate risk through market value fluctuations of balance sheet items (i.e., price risk) or through changes in interest income or expenses (i.e., refinancing or reinvestment risk). Interest rate risk mainly arises through interest bearing liabilities and assets. Our portfolio of investments as of December 31, 2023 was composed primarily of U.S. Treasury securities and other government-related securities. At December 31, 2023 and 2022, we had short-term investments and long-term investments of $121.4 million and $93.0 million, respectively. We invest funds to have a continuous inflow of cash from diversified short-term and long-term investments, consisting primarily of investment grade securities. A hypothetical 10 percent change in interest rates would not result in a material decrease or increase in the fair value of our securities due to the balance and diversified investment portfolio. Credit Risk. We monitor our investments with our investment managers with the objective of minimizing concentrations of credit risks. Our short-term investments consist of securities that mature in one year or less. Our long-term investments consist of securities that mature in more than one year. We invest cash in excess of our immediate requirements, in accordance with our investment policy, which limits the amounts we may invest in any one type of investment and requires all investments held by us to maintain minimum ratings from Nationally Recognized Statistical Rating Organizations so as to primarily achieve our goals of liquidity and capital preservation. Additionally, our investment policy is to invest only in institutions that meet high credit quality and diversification standards and established limits on the amount and time to maturity of investments. 81 Item 8. Financial Statement s and Supplementary Data Our consolidated financial statements are annexed to this Annual Report on Form 10-K beginning on page F-1. Item 9. Changes in and Disagreements with Accou ntants on Accounting and Financial Disclosure None.