GuruFocus Premium Membership

Serving Intelligent Investors since 2004. Only 96 cents a day.

Free Trial

Free 7-day Trial
All Articles and Columns »

Arena Pharmaceuticals Inc. Reports Operating Results (10-Q)

November 09, 2010 | About:
10qk

10qk

18 followers
Arena Pharmaceuticals Inc. (ARNA) filed Quarterly Report for the period ended 2010-09-30.

Arena Pharmaceuticals Inc. has a market cap of $171.9 million; its shares were traded at around $1.53 with and P/S ratio of 16.5. Arena Pharmaceuticals Inc. had an annual average earning growth of 21% over the past 10 years.

Highlight of Business Operations:

Revenues. We recognized total revenues of $7.6 million for the three months ended September 30, 2010, compared to $2.6 million for the three months ended September 30, 2009. Our revenues for the three months ended September 30, 2010 included (i) $4.0 million of previously deferred non-cash revenues recognized from our license agreement with TaiGen Biotechnology Co., Ltd., or TaiGen, (ii) $1.8 million recognized under our manufacturing services agreement with Siegfried, (iii) $1.0 million recognized from amortization of the $50.0 million non-refundable, upfront payment we received in July 2010 under our marketing and supply agreement with Eisai and (iv) $0.8 million recognized for patent activities from our collaboration with Ortho-McNeil-Janssen Pharmaceuticals, Inc., or Ortho-McNeil-Janssen. Our revenues for the three months ended September 30, 2009 included $1.7 million recognized under our manufacturing services agreement with Siegfried and $0.9 million recognized for patent activities, primarily related to the Ortho-McNeil-Janssen collaboration. On October 29, 2010, Ortho-McNeil-Janssen notified us that, effective December 28, 2010, it is terminating our collaboration.

Amortization of acquired technology and other intangibles. We recognized $0.5 million for amortization of acquired technology and other intangibles for the three months ended September 30, 2010, compared to $0.6 million for the three months ended September 30, 2009. The amortization expense recognized for the three months ended September 30, 2010 relates to the manufacturing facility production licenses we acquired in January 2008, which are being amortized over their estimated useful life of 20 years, and the Melanophore screening technology, our primary screening technology, which is being amortized over its estimated useful life of 10 years. Using the exchange rate in effect on September 30, 2010, we expect to record amortization expense of $0.2 million in the remaining quarter of 2010 and $0.7 million per year through 2027 for the manufacturing facility production licenses. We also expect to record amortization expense related to our Melanophore screening technology of $0.4 million in the remaining quarter of 2010 and the remaining amount of $0.3 million in the first quarter of 2011. We amortized the workforce we acquired from Siegfried in January 2008 through the end of 2009 over its estimated benefit of two years.

Interest and other income (expense), net. Total interest and other expense, net, increased by $6.9 million to $14.5 million for the three months ended September 30, 2010, from $7.6 million for the three months ended September 30, 2009. This increase was primarily due to an increase of $9.9 million in our non-cash loss on extinguishment of debt, which was partially offset by (i) a $1.1 million decrease in interest expense, primarily due to the lower outstanding principal balance on the Deerfield loan, (ii) a $0.9 million gain on investments and (iii) a $0.6 million non-cash gain due to the revaluation of our derivative liabilities. The interest expense recognized for the three months ended September 30, 2010 includes interest of $1.5 million paid to Deerfield in cash. We expect that our interest expense will continue to be substantial as a result of the Deerfield loan and, to a lesser degree, payments on our lease financing obligations.

collaboration with Ortho-McNeil-Janssen, (iv) $1.0 million recognized from amortization of the $50.0 million non-refundable, upfront payment we received from Eisai in July 2010 and (v) $0.4 million recognized related to a license agreement with GlaxoSmithKline LLC and GlaxoSmithKline Research & Development Limited, or collectively GSK, for their use of our Melanophore screening technology. Our revenues for the nine months ended September 30, 2009 included $4.7 million recognized under our manufacturing services agreement with Siegfried and $3.0 million recognized for patent activities, primarily related to the Ortho-McNeil-Janssen collaboration.

Research and development expenses. Research and development expenses decreased $30.0 million to $59.0 million for the nine months ended September 30, 2010, from $89.0 million for the nine months ended September 30, 2009. This was primarily due to decreases of (i) $25.8 million in external clinical and preclinical study fees and expenses primarily due to completing our pivotal Phase 3 clinical trials for lorcaserin, (ii) $2.2 million in salary and personnel costs as a result of our June 2009 workforce reduction and (iii) $0.8 million in both facility and equipment costs and research supplies. Included in the $14.0 million of total external clinical and preclinical study fees and expenses for the nine months ended September 30, 2010 was $12.8 million related to our lorcaserin program, $0.5 million related to our APD916 program for the treatment of narcolepsy with cataplexy, and $0.4 million related to our APD811 program for the treatment of pulmonary arterial hypertension. Included in the $39.8 million of total external clinical and preclinical study fees and expenses for the nine months ended September 30, 2009 was $38.4 million related to lorcaserin, $0.6 million related to APD811 and $0.4 million related to APD125, which we previously studied for insomnia.

Interest and other income (expense), net. Total interest and other expense, net, increased by $8.7 million to $22.4 million for the nine months ended September 30, 2010, from $13.7 million for the nine months ended September 30, 2009. This increase was primarily due to an increase of $9.9 million in our loss on extinguishment of debt and a $5.2 million increase in interest expense related to our Deerfield loan. These increases were partially offset by a $4.5 million gain due to the revaluation of our derivative liabilities and a $0.9 million gain on investments. The interest expense recognized for the nine months ended September 30, 2010 includes interest of $5.0 million we paid Deerfield in cash and the non-cash correction of prior period errors described in the notes to our financial statements herein, which resulted in a $3.0 million decrease to interest expense in the second quarter of 2010.

Read the The complete Report

About the author:

10qk
GuruFocus - Stock Picks and Market Insight of Gurus

Rating: 4.0/5 (5 votes)

Comments

Please leave your comment:


Get WordPress Plugins for easy affiliate links on Stock Tickers and Guru Names | Earn affiliate commissions by embedding GuruFocus Charts
GuruFocus Affiliate Program: Earn up to $400 per referral. ( Learn More)
Free 7-day Trial
FEEDBACK