Arena Cuts Loss, Misses Estimates

Zacks

Arena Pharmaceuticals Inc.’s (ARNA) loss (excluding special items) of 10 cents per share in the fourth quarter of 2012 was narrower than the year-ago loss of 16 cents per share.  The Zacks Consensus Estimate was a loss of 2 cents per share.

Arena Pharma recorded fourth quarter revenues of $1.9 million, down 6.7% from the year-ago period, and well below the Zacks Consensus Estimate of $26 million.

Full year loss came in at 45 cents per share, narrower than the year-ago loss by 43.8%. The Zacks Consensus Estimate for the full year was a loss of 36 cents per share. Revenues for the full year came in at $27.6 million as against revenues of $12.7 million in 2011. Full year revenues were also below the Zacks Consensus Estimate of $52 million.

Other Details

Research and development expenses increased 6.5% to $13.9 million. General and administrative expenses increased 38.3% to $7.3 million. Higher share based compensation and personnel costs led to the increase.

2013 Guidance

Arena Pharma expects to receive revenues of $65 million from Eisai Co., Ltd (ESALY) as milestone payments. In addition to this, Arena Pharma expects to receive approximately $6 million from collaborators as amortization of upfront payments. Another $3 million is expected from Siegfried for manufacturing services. An additional regulatory milestone payment of $1.5 million from Eisai is also expected.

The company expects a milestone payment of $500,000 for every regulatory submission of Belviq in Mexico, Canada and Brazil from Eisai.

Arena Pharma expects research and development expenses in the range of $70−$78 million. General and administrative expenses are expected in the range of $28−$34 million.

Meanwhile, a response regarding the regulatory status of Belviq in the EU should be out in the first half of 2013. Arena Pharma is also working with Eisai to submit regulatory applications for the drug in Canada, Mexico and Brazil.

We expect investor focus to remain on the launch of Belviq in the US. The US Drug Enforcement Administration (:DEA) issued a notice proposing that Belviq should be placed in Schedule IV of the Controlled Substances Act.

We remind investors that on Jun 27, 2012, Belviq was approved by the US Food and Drug Administration (:FDA) as an adjunct to a healthy diet (low on calories) and increased physical activity for chronic weight management in obese or overweight. However, we remind investors that companies like Vivus Inc. (VVUS) have a presence in the obesity market.

Currently, Arena Pharma carries a Zacks Rank #3 (Hold). Comparatively other biopharma stocks like Celldex Therapeutics, Inc. (CLDX) look better positioned carrying a Zacks Rank #2 (Buy).

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