Arena Pharmaceuticals, Inc. (ARNA)

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Arena Pharmaceuticals, Inc. (ARNA)

Lazard Capital Markets Healthcare Conference Call

November 13, 2012 11:30 ET


Robert Hoffman - Chief Financial Officer

Craig Audet - Operations and Head of Global Regulatory Affairs

Cindy McGee - Investor Relations


Joshua Schimmer - Lazard Capital Markets


Joshua Schimmer - Lazard Capital Markets

Okay. I think we’re going to get started everyone. I am Joshua Schimmer from Lazard Capital Markets Biotech team. It’s a pleasure to introduce Arena Pharmaceuticals. So BELVIQ became one of the two obesity drugs approved earlier this year. From Arena we have Robert Hoffman, Chief Financial Officer, Craig Audet, Operations and Head of Global Regulatory Affairs and Cindy McGee from Investor Relations.

So, Robert maybe you want to start with a few prepared remarks then we’ll go and take Q&A.

Robert Hoffman - Chief Financial Officer

Sure. Thanks, Josh and thanks for having us here. We are so pleased to get our drug approved BELVIQ on June 27th of 2012. The first drug approved for a weight-loss indication in 13 year. And so we’re just waiting on DEA scheduling right now. BELVIQ is a product of our GPCR platform technology and we have multiple shorts and go behind it. I think we’ll touch on that the pipeline a little bit later but we have a PAH APD811 for PAH which is in a Phase I Multiple Ascending Dose clinical trial right now.

We plan on initiating the Phase I for APD334 which is for autoimmune indication. And then beyond that we have a pain indication as well. So we are thrilled with that. I don’t think that to tell anyone in the audience here that obesity is a large market. One-third of all U.S adults are classified as obese, two-thirds are classified as overweight or obese.

Significant market opportunity, worldwide it’s a 0.5 billion individuals are classified as obese. So it’s a significant market opportunity for us. We actually are very much ready for the launch. We’ve delivered we announced in our last 10-Q launch supply to Eisai. So we delivered a $11.6 million worth. It’s a portion of the launch supply. So we’ll be ready to launch as soon as we get DEA scheduling.

Eisai has been an excellent marketing partner. They had been able to market successfully two block busters in Aricept as well as Aciphex both of that come in our patent. So they’re really focused on the launch of BELVIQ going forward. The economics are significant to us we get we sell them product and from for the very first dollar we get 31.5% of their net sales not a profit share but net sale, very significant.

So in terms of looking at further down the economics at $250 million in net sale. We’ll get 31.5% of that which is about $80 million plus that threshold we achieved some purchase price adjustments as well as some milestones which another $55 million take on top of that when we get DEA scheduling is another $65 million. So if I do my math right that’s an excess of $200 million on their first $250 million of sale.

So it makes significant opportunity for us. In terms of other opportunities we just announced last week a nice collaboration with the South Korean company Ildong but we received a $5 million upfront payment great economic service as well first dollar on net sales is at 35% and that will ramps up to 45% on net sale.

In terms of other areas that we are moving forward with the European strategy. We did file in the EU in March of this year. I can’t believe it’s for this year but and so we founded the 120 day questions and we are hopeful to get a decision on that in first half of 2013 probably behind that is actually Switzerland as well which is where our manufacturing facility is.

So we filed in Switzerland and we expect a decision on that in the first half of 2013 as well. In terms of financials we adjusted our guidance to and 2012 the $165 million in cash that is not include the DEA scheduling milestone of $65 million and it does include the purchase price excuse me the purchase payment as well as the $5 million from Ildong.

Again we are very well financed and we’ve reiterated that we don’t haven’t need to finance at this time. In terms of upcoming milestones I did mention the DEA scheduling. Again we are very much looking forward to launching this drug with our experience partner Eisai

We will announce the results from the APD811 in 2013 and we expect to go into the clinic for APD334 for autoimmune diseases. Again the EU and the first half of 2013 and we look to partner the drug in another opportunities in addition to North and South America with Eisai as well as Ildong with Korea.

With that I am sure Josh you have plenty questions for us and we’re ready to get started.

Question-and-Answer Session

Joshua Schimmer - Lazard Capital Markets

Yeah maybe we can start on the DEA scheduling and give us a sense and what the potential outcomes on that are and how each outcome determines what you can and cannot do on the marketing front?

Craig Audet

Sure, Joshua. I’ll take that. The, as you probably know there are five different schedules DEA there are schedule one to schedule five. Schedule one is the most restrictive it actually includes all the illegal agents like LSD and heroin where there is no medical application. And that runs all the way down to schedule five. It’s created in terms of abuse potential.

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