Arena Loss Wider Than Expected

Arena Pharmaceuticals, Inc.’s (ARNA) fourth quarter fiscal 2009 net loss per share came in at 38 cents (excluding special items), wider than the Zacks Consensus Estimate of a loss of 30 cents. The year-ago loss was 84 cents. For 2009, the company reported a loss per share of $1.81 (excluding special items) compared to a loss of $3.21 (excluding special items) in 2008.

Revenue in the reported quarter was flat at approximately $2.7 million. Manufacturing services revenue fell slightly to $1.92 million from $1.97 million in the year-ago quarter. Revenue from collaborative agreements climbed to $766,000 from $725,000 in the fourth quarter of 2008. Revenue for fiscal 2009 was $10.39 million, versus $9.81 million in 2008.

Total operating expenses in the reported quarter fell 51.5% to $31.33 million from $64.64 million in the year-ago quarter because of lower research and development (R&D) expenses. R&D expenses plummeted 60% year-over-year to $21.2 million.

The sharp decline was primarily attributable to the completion of two late-stage studies that evaluated the safety and efficacy of lorcaserin, the company’s candidate for weight management. R&D expenses also declined because Arena focused its spending on activities that supported the submission of a New Drug Application for lorcaserin in Dec 2009. The U.S. Food and Drug Administration (FDA) has set an action date of Oct 22 to complete its application review.

R&D expenses are expected to decline further in 2010 because of the completion of the studies of lorcaserin in addition to other cost-cutting measures. General and administrative expenses for the reported quarter stood at $6.5 million as against $8.6 million in the year-ago quarter.

Arena exited the quarter with cash, cash equivalents and short-term investments of $115.4 million.

Outlook

Arena expects to use cash, cash equivalents and short-term investments ranging from $97 to $107 million for its operating activities and interest expense in 2010 and approximately $7 million for capital expenditures mainly for the manufacturing facility in Switzerland. The projection is based on the assumption that only Arena will pay for the lorcaserin pre-commercial launch activities.

The company expects the FDA to approve lorcaserin in 2010. Lorcaserin would be Arena's first drug to hit the market. Other obesity candidates that could hit the market at the same time as lorcaserin include Qnexa of Vivus Inc. (VVUS) and Contrave of Orexigen Therapeutics Inc. (OREX).

Read the full analyst report on ARNA

Read the full analyst report on VVUS

Read the full analyst report on OREX