Arena Pharmaceuticals Inc.
) suffered a loss (excluding special items) of 12 cents per share
in the second quarter of 2012 as against a loss of 16 cents
incurred in the year-ago quarter. However, second quarter 2012 loss
was wider than the Zacks Consensus Estimate of a loss of 8 cents
per share. The narrower year-over-year loss was attributable to
Arena Pharma recorded second quarter revenues of $22 million
compared to revenues of $3.3 million in the prior-year quarter. The
jump was mainly attributable to the $20 million milestone payment
received from partner, Eisai Inc. related to the agreement between
the companies regarding weight loss drug, Belviq. The Zacks
Consensus Estimate was much lower at $10 million.
Operating expenses at Arena Pharma declined 13.4% to $20.1
million on account of lower research and development (R&D) and
general and administrative (G&A) expenses. R&D expenses
recorded a decline of 4.1% to 14.1 million due to decrease in
salary and other personnel-related expenses. G&A expenses
decreased 14.7% to $5.1 million in the reported quarter due to
lower patent-related legal fees.
FDA Approval for Belviq
In June 2012, the US Food and Drug Administration (FDA) approved
Belviq (lorcaserin HCl) as an adjunct to a healthy diet (low on
calories) and increased physical activity for chronic weight
management in obese (Body Mass Index, or BMI, >30) or overweight
(BMI >27) adults suffering from at least one weight-related
co-morbid condition. The move marks the first FDA approval for a
weight-loss drug in 13 years.
While clearing the drug, whose safety and efficacy when
coadministered with other weight loss products and the effect on
cardiovascular morbidity and mortality are yet to be established,
the FDA recommended Belviq to be classified by the US Drug
Enforcement Administration (DEA) as a scheduled drug.
Eisai, which will market Belviq in the US, is preparing for the
launch of the drug after the DEA gives its verdict on the matter.
Eisai is currently expecting Belviq to hit the US market in early
Both Eisai and Arena Pharma will have to conduct post-marketing
studies to evaluate the safety and efficacy of Belviq for weight
management in the pediatric population. Post-marketing studies will
also be conducted to evaluate the effect of long-term Belviq
therapy in overweight and obese patients suffering from
cardiovascular disease or who are exposed to cardiovascular risk
factors. The companies intend to work with the FDA on the
finalization of the post-marketing study designs.
We note that Belviq received a 120 day assessment report from
the European Medicines Agency (EMA) for the Marketing Authorization
Application (MAA) submitted in the EU. Arena Pharma expects a final
decision from the EU in the first half of 2013. Belviq is also
under review in Switzerland. Approval in the EU and Switzerland
would further boost the sales potential of the drug.
For 2012, Arena Pharma increased its revenue guidance to a band
of $91 million to $97 million from the earlier range of $66 million
to $72 million. This includes a $20 million milestone payment
received from Eisai in the first quarter of 2012 and $65 million
milestone payments which Arena Pharma will receive following the
DEA scheduling designation and launch of Belviq. The company also
mentioned that they revenues could be lower by $65 million if the
company fails to receive DEA scheduling in 2012.
However Arena Pharma continues to expect R&D expenses in the
range of approximately $57 million to $67 million. Arena Pharma
also kept its G&A expenses guidance unchanged at $20 million to
Arena Pharma expects 2012 cash, cash equivalents and short-term
investments to be approximately $215 million instead of the
previously mentioned guidance of $84 million to $89 million subject
to the DEA scheduling and launch of Belviq.
We currently have a Neutral recommendation on Arena Pharma which
carries a Zacks #2 Rank (short term 'Buy' rating) The FDA approval
of Belviq is a huge boost for the company. The drug targets the
highly lucrative obesity market. However, we note that competition
is fast catching up with
) obesity drug Qsymia recently gaining approval from the FDA.
Another potential competitor could be
Orexigen Therapeutics, Inc.
) Contrave upon approval. We expect investor focus to remain on the
DEA scheduling of the drug.
ARENA PHARMA (ARNA): Free Stock Analysis Report
OREXIGEN THERAP (OREX): Free Stock Analysis
VIVUS INC (VVUS): Free Stock Analysis Report
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