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

August 09, 2011 | About:
EconMatters

10qk

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Arena Pharmaceuticals Inc. (ARNA) filed Quarterly Report for the period ended 2011-06-30.

Arena Pharmaceuticals Inc. has a market cap of $189.4 million; its shares were traded at around $1.27 with and P/S ratio of 11.4. Arena Pharmaceuticals Inc. had an annual average earning growth of 6.8% over the past 10 years.

Highlight of Business Operations:

Revenues. We recognized revenues of $3.3 million during the three months ended June 30, 2011, compared to $2.4 million during the three months ended June 30, 2010. Our revenues for the three months ended June 30, 2011 included (i) $1.3 million of manufacturing services revenue under our manufacturing services agreement with Siegfried Ltd, or Siegfried, (ii) $1.0 million under our marketing and supply agreement with Eisai in reimbursements for additional lorcaserin development work and (iii) $1.0 million from amortization of the $50.0 million non-refundable, upfront payment we received in July 2010 from Eisai. Our revenues for the three months ended June 30, 2010 included $1.4 million of manufacturing services revenues and $0.6 million for patent activities, primarily related to our former collaboration with Ortho-McNeil-Janssen Pharmaceuticals, Inc., or Ortho-McNeil-Janssen, which was terminated effective December 28, 2010.

Included in the $1.9 million total external clinical and preclinical study fees and expenses noted in the table above for the three months ended June 30, 2011 was $0.9 million related to our lorcaserin program, $0.5 million related to our APD811 program for the potential treatment of pulmonary arterial hypertension, $0.3 million related to our APD334 program for the potential treatment of autoimmune diseases, including multiple sclerosis, and $0.2 million related to our GPR119 program for the potential treatment of type 2 diabetes. Included in the $3.6 million total external clinical and preclinical study fees and expenses noted in the table above for the three months ended June 30, 2010 was $3.0 million related to our lorcaserin program, $0.5 million related to our APD916 program (which we formerly studied for the potential treatment of narcolepsy with cataplexy and have since abandoned) and $0.1 million related to our APD811 program.

Interest and other expense, net. Total interest and other expense, net, increased by $1.1 million to $2.9 million for the three months ended June 30, 2011, from $1.8 million for the three months ended June 30, 2010. This increase was primarily the result of a $4.3 million decrease in interest expense recorded in the three months ended June 30, 2010 for the non-cash correction of prior period errors. Interest expense of $1.2 million related to the Deerfield loan was recognized for the three months ended June 30, 2011, which included $0.5 million we paid Deerfield in cash. For the three months ended June 30, 2010, interest expense of $0.4 million was recognized on the Deerfield loan after the non-cash correction of prior period errors, which included $1.7 million we paid Deerfield in cash. Although we expect the two debt prepayments of $20.0 million and $17.7 million made in the first quarter of 2011 to reduce our future interest expense by $3.7 million, we expect that our interest expense will continue to be substantial due to both the $22.3 million remaining principal balance and accretion on the Deerfield loan and payments on our lease financing obligations. At June 30, 2011, we expect interest expense of $3.5 million to be paid in cash over the remaining term of the Deerfield loan.

Revenues. We recognized revenues of $7.2 million during the six months ended June 30, 2011, compared to $5.0 million during the six months ended June 30, 2010. Our revenues for the six months ended June 30, 2011 included (i) $2.7 million in manufacturing services revenue under our manufacturing services agreement with Siegfried, (ii) $2.0 million from amortization of the $50.0 million non-refundable, upfront payment we received in July 2010 from Eisai, (iii) $1.9 million under our marketing and supply agreement with Eisai in reimbursements for additional lorcaserin development work and (iv) $0.5 million related to our former collaboration with Ortho-McNeil-Janssen, primarily for patent activities. Our revenues for the six months ended June 30, 2010 included (i) $3.4 million under our manufacturing services agreement with Siegfried, (ii) $1.2 million for patent activities primarily from our former collaboration with Ortho-McNeil-Janssen and (iii) $0.4 million related to a technology license agreement with GlaxoSmithKline LLC and GlaxoSmithKline Research & Development Limited for their use of our Melanophore screening technology.

Research and development expenses. Research and development expenses decreased $8.2 million to $30.6 million for the six months ended June 30, 2011, from $38.8 million for the six months ended June 30, 2010. This was primarily due to decreases of (i) $3.9 million in salary and personnel costs as a result of our 2011 workforce reduction, (ii) $2.0 million in external clinical and preclinical study fees and expenses primarily due to completing our Phase 3 clinical trials for lorcaserin and (iii) $1.2 million in facility and equipment costs, primarily depreciation expense. These decreases were partially offset by a $1.1 million increase in internal research and development manufacturing costs for our Swiss facility due to a decrease in manufacturing services under our agreement with Siegfried that resulted in an increase in our unused manufacturing capacity. Our internal research and development manufacturing costs include costs related to lorcaserin activities as well as unused manufacturing capacity. Included in the $3.7 million of total external clinical and preclinical study fees and expenses for the six months ended June 30, 2011 was $1.4 million related to our APD811 program, $1.2 million related to our lorcaserin program and $0.6 million related to our APD334 program. Included in the $5.7 million of total external clinical and preclinical study fees and expenses for the six months ended June 30, 2010 was $4.5 million related to our lorcaserin program, $0.6 million related to APD916 and $0.4 million related to our APD811 program.

Interest and other expense, net. Total interest and other expense, net, increased by 9.8 million to $17.6 million for the six months ended June 30, 2011, from $7.8 million for the six months ended June 30, 2010. This increase was primarily due a (i) $10.5 million non-cash loss on extinguishment of debt and (ii) $1.2 million reduction in the non-cash gain from revaluation of our derivative liabilities. These increases were partially offset by a $2.1 million decrease in interest expense primarily related to the Deerfield loan as a result of principal repayments totaling $67.7 million that we made subsequent to June 30, 2010. The interest expense recognized in the six months ended June 30, 2010 also included the non-cash correction of prior period errors which resulted in a $3.0 million decrease to interest expense. The interest expense recognized for the six months ended June 30, 2011 included $1.4 million we paid Deerfield in cash, compared to $3.5 million paid for the six months ended June 30, 2010.

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