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Arena (ARNA) to Cut 73% Workforce, Shifts Focus to Pipeline
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Arena Pharmaceuticals, Inc. announced a 73% cut in its workforce and said that it will be shifting its priorities to its proprietary clinical stage pipeline.
Workforce Reduction to Cut Costs
The U.S. workforce will be cut by approximately 100 employees by Aug 31, 2016, mainly in the areas of research, manufacturing and G&A. The company estimates that this move will reduce annualized cash expenditures for personnel by about $17 million and related other operating expenses of between $6-8 million.
Additional cost reduction measures include reductions at the company’s Swiss manufacturing facility.
Arena expects to incur restructuring charges of about $6.1 million (a majority of which are cash expenditures), mostly in the second quarter of 2016.
Focus Shifts to Pipeline
Arena, which has obesity treatment, Belviq, in its marketed portfolio, intends to focus on its pipeline which comprises etrasimod (APD334; phase II study ongoing for ulcerative colitis, with potential for additional indications including beyond inflammatory bowel disease), APD371 (recently completed a phase I multiple-ascending dose study with favorable results; under evaluation for pain indications) and ralinepag (APD811; phase II study ongoing for pulmonary arterial hypertension).
The company also intends to support its collaborations with companies like Eisai Co., Ltd. for Belviq, Axovant Sciences Ltd. (nelotanserin for central nervous system disorders; currently in phase II studies), Ildong Pharmaceuticals Co., Ltd. (temanogrel for thrombotic diseases –phase I study ongoing) and Boehringer Ingelheim (preclinical development of candidates targeting a central nervous system receptor for psychiatric diseases).
Our Take
This is not the first time that Arena has announced a reduction in workforce. In Oct 2015, the company had announced a 35% reduction in its U.S. workforce while in Nov 2015, the company had said it would cut its Swiss workforce by approximately 17%.
Arena has been facing challenges in driving sales of its obesity drug Belviq. While the obesity market represents significant commercial potential, certain challenges remain. These include the tendency of healthcare providers to treat symptoms of obesity rather than the disease itself, a narrow focus on certain patient types for treatment and historically low third-party insurance coverage. Belviq will continue to grow slowly until results from a cardiovascular outcomes study are available.
We note that Arena is not the only company facing challenges in the obesity market. VIVUS Inc. ’s obesity drug Qsymia’s performance has also been lackluster and VIVUS cut its Qsymia sales force last year.
Arena will provide an update on the second quarter call on its strategic focus and streamlining efforts.
Arena is a Zacks Rank #2 (Buy) stock. A better-ranked stock in the healthcare sector is ANI Pharmaceuticals, Inc. (ANIP - Free Report) – a Zacks Rank #1 (Strong Buy) stock.
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Arena (ARNA) to Cut 73% Workforce, Shifts Focus to Pipeline
Arena Pharmaceuticals, Inc. announced a 73% cut in its workforce and said that it will be shifting its priorities to its proprietary clinical stage pipeline.
Workforce Reduction to Cut Costs
The U.S. workforce will be cut by approximately 100 employees by Aug 31, 2016, mainly in the areas of research, manufacturing and G&A. The company estimates that this move will reduce annualized cash expenditures for personnel by about $17 million and related other operating expenses of between $6-8 million.
Additional cost reduction measures include reductions at the company’s Swiss manufacturing facility.
Arena expects to incur restructuring charges of about $6.1 million (a majority of which are cash expenditures), mostly in the second quarter of 2016.
Focus Shifts to Pipeline
Arena, which has obesity treatment, Belviq, in its marketed portfolio, intends to focus on its pipeline which comprises etrasimod (APD334; phase II study ongoing for ulcerative colitis, with potential for additional indications including beyond inflammatory bowel disease), APD371 (recently completed a phase I multiple-ascending dose study with favorable results; under evaluation for pain indications) and ralinepag (APD811; phase II study ongoing for pulmonary arterial hypertension).
The company also intends to support its collaborations with companies like Eisai Co., Ltd. for Belviq, Axovant Sciences Ltd. (nelotanserin for central nervous system disorders; currently in phase II studies), Ildong Pharmaceuticals Co., Ltd. (temanogrel for thrombotic diseases –phase I study ongoing) and Boehringer Ingelheim (preclinical development of candidates targeting a central nervous system receptor for psychiatric diseases).
Our Take
This is not the first time that Arena has announced a reduction in workforce. In Oct 2015, the company had announced a 35% reduction in its U.S. workforce while in Nov 2015, the company had said it would cut its Swiss workforce by approximately 17%.
Arena has been facing challenges in driving sales of its obesity drug Belviq. While the obesity market represents significant commercial potential, certain challenges remain. These include the tendency of healthcare providers to treat symptoms of obesity rather than the disease itself, a narrow focus on certain patient types for treatment and historically low third-party insurance coverage. Belviq will continue to grow slowly until results from a cardiovascular outcomes study are available.
We note that Arena is not the only company facing challenges in the obesity market. VIVUS Inc. ’s obesity drug Qsymia’s performance has also been lackluster and VIVUS cut its Qsymia sales force last year.
Arena will provide an update on the second quarter call on its strategic focus and streamlining efforts.
Arena is a Zacks Rank #2 (Buy) stock. A better-ranked stock in the healthcare sector is ANI Pharmaceuticals, Inc. (ANIP - Free Report) – a Zacks Rank #1 (Strong Buy) stock.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>