Arena third quarter net loss increases to $36.3 million

Arena Pharmaceuticals, Inc.Nov 9 2010

Arena Pharmaceuticals, Inc. (Nasdaq: ARNA) today reported financial results for the third quarter ended September 30, 2010. Arena also reported earlier today top-line results from its lorcaserin Phase 3 BLOOM-DM (Behavioral modification and Lorcaserin for Overweight and Obesity Management in Diabetes Mellitus) trial.

"We believe the BLOOM-DM top-line results provide additional support for lorcaserin's benefit-to-risk profile," said Jack Lief, Arena's President and Chief Executive Officer. "We remain focused on addressing the recommendations outlined by the FDA in the complete response letter for lorcaserin."

Arena reported a net loss in the third quarter of 2010 of $36.3 million, or $0.31 per share, compared to a net loss in the third quarter of 2009 of $34.8 million, or $0.38 per share, and a net loss in the first nine months of 2010 of $96.3 million, or $0.91 per share, compared to a net loss in the first nine months of 2009 of $123.4 million, or $1.51 per share.

As expected, research and development expenses declined to $20.2 million in the third quarter of 2010 from $22.1 million in the third quarter of 2009. Research and development expenses in the first nine months of 2010 declined to $59.0 million from $89.0 million in the first nine months of 2009. This decrease is primarily due to completing our lorcaserin pivotal Phase 3 clinical trials. Research and development expenses included $2.6 million in non-cash, share-based compensation expense in the first nine months of 2010, compared to $2.9 million in the first nine months of 2009. General and administrative expenses totaled $6.9 million in the third quarter of 2010, compared to $5.4 million in the third quarter of 2009, and $20.6 million in the first nine months of 2010, compared to $18.7 million in the first nine months of 2009. This increase is primarily attributable to increased legal and marketing research expenses. General and administrative expenses in the first nine months of 2010 included $1.7 million in non-cash, share-based compensation expense, compared to $2.2 million in the first nine months of 2009. Total interest and other expense increased to $22.4 million in the first nine months of 2010, compared to $13.7 million in the first nine months of 2009. This increase is primarily attributable to increases in the loss on extinguishment of debt, a non-cash item, and interest expense, both related to Arena's loan from certain Deerfield entities.

At September 30, 2010, cash, cash equivalents and short-term investments totaled $176.5 million and approximately 121.4 million shares of common stock were outstanding.

Arena's Recent and Third Quarter Developments

Lorcaserin

• Announced top-line results from the lorcaserin BLOOM-DM trial that demonstrate statistically significant weight loss and improved HbA1c in obese and overweight patients with type 2 diabetes. In this trial, lorcaserin met all three primary efficacy endpoints.
• The US Food and Drug Administration (FDA) issued a Complete Response Letter (CRL) regarding Arena's New Drug Application (NDA) for lorcaserin. In the CRL, the FDA stated that it has completed its review of the NDA and determined that it cannot approve the application in its present form. The FDA also outlined non-clinical and clinical reasons for its decision and provided recommendations relating to addressing such issues. Prior to issuance of the CRL, the FDA Endocrinologic and Metabolic Drugs Advisory Committee voted nine to five that the available data do not demonstrate that the potential benefits of lorcaserin outweigh the potential risks when used long term in a population of overweight and obese individuals to allow marketing approval.
• Results from a lorcaserin mechanism of action study conducted at the Pennington Biomedical Research Center were presented at Obesity 2010, the 28th Annual Scientific Meeting of The Obesity Society. The data presented showed that lorcaserin reduces energy intake and appetite, and causes weight loss without stimulating energy expenditure.
• The FDA completed the Pre-Approval Inspection of Arena's drug product manufacturing facility in Switzerland and classified the inspection as No Action Indicated.
• Results from Arena's two-year, pivotal Phase 3 BLOOM (Behavioral modification and Lorcaserin for Overweight and Obesity Management) trial were published in the July 15, 2010, issue of the New England Journal of Medicine. The data presented in the article show that lorcaserin used in conjunction with behavioral modification caused significantly greater weight loss and improved maintenance of weight loss compared to placebo. The data also indicated that lorcaserin improved values for biomarkers that may be predictive of future cardiovascular events, including lipid levels, insulin resistance, levels of inflammatory markers and blood pressure.
• Arena's wholly owned subsidiary, Arena Pharmaceuticals GmbH, entered into a marketing and supply agreement with Eisai Inc. for the commercialization of lorcaserin in the United States following FDA approval of the NDA for lorcaserin. Under the terms of the agreement, Arena received a non-refundable, upfront payment of $50.0 million from Eisai.

Other

• Announced that following the completion of a Phase 1 clinical trial program for APD597, Ortho-McNeil-Janssen Pharmaceuticals, Inc., decided not to advance APD597 and notified Arena that it is terminating their collaboration, effective December 28, 2010. APD597 is a GPR119 agonist intended for the treatment of type 2 diabetes, which, along with other compounds and intellectual property, will revert to Arena upon termination of the collaboration. The Phase 1 program provided evidence for incretin stimulation (GLP-1, GIP and PYY) and reductions in post-meal glucose increases with APD597 alone and in combination with sitagliptin, a DPP-4 inhibitor.
• Announced results from a Phase 1 clinical trial of APD916, a novel drug candidate Arena discovered that targets the histamine H3 receptor for the treatment of narcolepsy with cataplexy. In this randomized, double-blind, placebo-controlled trial in 24 healthy volunteers, APD916 demonstrated dose-proportional pharmacokinetic exposure over the tested dose range.
• Received gross proceeds of approximately $60.0 million from the sale of 8,955,224 shares of its common stock to certain Deerfield entities at a price of $6.70 per share. As part of the transaction, Arena amended its June 2009 Facility Agreement with Deerfield pursuant to which $30.0 million of the proceeds from this transaction was used to prepay the portion of the principal amount that Arena otherwise would have been required to repay in July 2012.