Arena fourth quarter net loss decreases to $28.2 million

Arena Pharmaceuticals, Inc.Mar 11 2011

Arena Pharmaceuticals, Inc. (Nasdaq: ARNA) today reported financial results for the fourth quarter and full year ended December 31, 2010, and reviewed recent developments.

"Our focus is working with Eisai to obtain FDA approval of lorcaserin, preparing to submit an application for European approval of lorcaserin, and advancing select earlier-stage research and development programs on our own or in collaboration," said Jack Lief, Arena's President and Chief Executive Officer. "Resubmitting the lorcaserin NDA is our top priority, and we are committed to addressing the outstanding issues to the FDA's satisfaction."

Arena reported a net loss in the fourth quarter of 2010 of $28.2 million, or $0.23 per share, compared to a net loss in the fourth quarter of 2009 of $29.8 million, or $0.32 per share, and a net loss in the full year ended December 31, 2010, of $124.5 million, or $1.14 per share, compared to a net loss in the full year ended December 31, 2009, of $153.2 million, or $1.82 per share.

Research and development expenses continued to decline to $16.5 million in the fourth quarter of 2010 from $21.2 million in the fourth quarter of 2009. Research and development expenses declined to $75.5 million in the full year ended December 31, 2010, from $110.2 million in the full year ended December 31, 2009. This decrease is primarily due to the completion of Arena's lorcaserin Phase 3 clinical trials. Arena expects its research and development expenses to continue to decline in 2011 due to the completion of the lorcaserin Phase 3 clinical trials, expected cost savings from its recently announced workforce reduction and other cost-containment measures. Research and development expenses for all of 2010 included $3.4 million in non-cash, share-based compensation expense, compared to $4.1 million in 2009. General and administrative expenses totaled $7.3 million in the fourth quarter of 2010, compared to $6.5 million in the fourth quarter of 2009, and $27.9 million in the full year ended December 31, 2010, compared to $25.2 million in the full year ended December 31, 2009. This increase is primarily attributable to expenses related to litigation and increased patent fees. General and administrative expenses in the full year ended December 31, 2010, included $2.1 million in non-cash, share-based compensation expense, compared to $2.8 million in 2009.

Total interest and other expense increased to $28.2 million in the full year ended December 31, 2010, compared to $14.8 million in 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 December 31, 2010, cash and cash equivalents totaled $150.7 million and approximately 121.5 million shares of common stock were outstanding.

Arena's Recent and Fourth Quarter 2010 Developments

Lorcaserin

• Received a complete response letter from the US Food and Drug Administration (FDA) regarding the lorcaserin New Drug Application (NDA), completed an end-of-review meeting with the FDA and reported on Arena and Eisai's plans related to resubmitting the NDA.
• Announced top-line results from the Phase 3 BLOOM-DM (Behavioral modification and Lorcaserin for Overweight and Obesity Management in Diabetes Mellitus) trial, which evaluated lorcaserin for weight management in obese and overweight patients with type 2 diabetes. Lorcaserin met the three primary efficacy endpoints, and Arena believes the results favorably support the benefit-risk profile of lorcaserin.
• Presented at Obesity 2010, the 28th Annual Scientific Meeting of The Obesity Society, results from a lorcaserin mechanism of action study conducted at the Pennington Biomedical Research Center. The data showed that lorcaserin reduces energy intake and appetite, and causes weight loss without stimulating energy expenditure.

Other

• Announced the issuance of US Reissue Patent No. RE42,190 with claims to methods of identifying compounds that modulate the activity of the GPR119 receptor, a target for identifying small molecules for the treatment of diabetes.
• Announced the resignation of Robert E. Hoffman, Vice President, Finance and Chief Financial Officer. Mr. Hoffman will remain in his current role at Arena until the filing of the Form 10-K for the year ended December 31, 2010.
• Committed to a reduction in Arena's US workforce of approximately 25%, or 66 employees, which is expected to be completed around March 28, 2011. As a result of this workforce reduction, Arena expects to incur restructuring charges, primarily in the first quarter of 2011, of approximately $3.8 million in connection with one-time employee termination costs.
• Initiated dosing in a Phase 1 clinical trial of APD811, an oral drug candidate Arena discovered that targets the prostacyclin receptor for the treatment of pulmonary arterial hypertension. This randomized, double-blind, placebo-controlled trial is evaluating the safety, tolerability and pharmacokinetics of single-ascending doses of APD811.
• 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 terminated the collaboration effective December 28, 2010. APD597 targets the GPR119 receptor for the treatment of type 2 diabetes, which, along with other compounds and intellectual property, reverted to Arena under the terms of the collaboration. Arena believes APD597 may have utility alone and in combination with a DPP-4 inhibitor for the treatment of type 2 diabetes.
• 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.

Outlook for 2011

Arena expects to use cash and cash equivalents of approximately $78 to $84 million for its operating activities and interest expense in 2011, and approximately $2 million for capital expenditures. In January 2011, Arena prepaid the $20 million payment that was due to Deerfield in July 2011. Assuming no additional capital from collaborators, investors or other sources, Arena would expect to end 2011 with approximately $45 million to $51 million.