Arena Pharma (ARNA) Announces Cost-Reduction Program; Will Trim U.S. Headcount by 35%

Arena Pharma (NASDAQ: ARNA) announced plans to improve efficiencies and reduce costs as it focuses on the advancement of its research and development priorities.

Arena intends to focus on its key strengths by concentrating near-term activities and resources primarily on:

• advancing its APD334 program, including the ongoing Phase 2 clinical trial for ulcerative colitis, and potentially exploring additional indications beyond inflammatory bowel disease through small pilot studies;
• advancing its ralinepag (formerly known as APD811) program, including its ongoing Phase 2 clinical trial for pulmonary arterial hypertension (PAH), and potentially exploring enhanced efficacy with other classes of PAH agents;
• advancing its APD371 program through a Phase 1 multiple-ascending dose clinical trial;
• supporting Eisai to advance the MACE, diabetes conversion, MACE plus and other endpoints of the ongoing BELVIQ® (lorcaserin HCl) cardiovascular outcomes trial (CVOT), also known as the CAMELLIA study, and seeking potential regulatory approval for BELVIQ XR®, a once-daily formulation of BELVIQ;
• maintaining its core research function to discover and advance drug candidates;
• assessing strategic collaboration opportunities for certain clinical- and earlier-stage programs; and
• meeting manufacturing obligations to collaborators and others, while reducing commercial manufacturing overhead to achieve potential savings.

As part of this initiative, Arena will reduce its US workforce by approximately 80 employees or 35%, which Arena estimates will reduce annualized cash expenditures for personnel by approximately $11.0 million. Arena plans to implement additional cost control measures to further reduce its expenditures, including reductions at its Swiss manufacturing facility, Arena Pharmaceuticals GmbH.

"This initiative supports our strong desire to create a more streamlined and efficient organization focused on key priorities designed to add both near- and long-term value to the organization," said Harry F. Hixson, Jr., Arena's interim Chief Executive Officer. "We believe our clinical-stage pipeline, including the MACE plus portion of the CAMELLIA study, offer tremendous promise, and we are committed to generating clinical data supporting meaningful differentiation of our compounds from currently available therapies. We thank all of our employees who were affected by today's announcement for their contributions to Arena."

As a result of the US workforce reduction, which is planned to be completed by December 31, 2015, Arena estimates it will incur restructuring charges, primarily in the fourth quarter of 2015, of approximately $3.3 million in connection with one-time employee termination costs, including severance and other benefits.

As part of this initiative, Arena does not intend to currently advance certain lifecycle management programs for lorcaserin, including evaluating lorcaserin in combination with phentermine and for smoking cessation. Feedback from the US Food and Drug Administration regarding a lorcaserin and phentermine combination for weight management indicated that a full development program would be required, including a factorial design Phase 2 study and two, 1-year Phase 3 studies. In addition, with respect to lorcaserin's potential for smoking cessation, there are market-specific challenges that might limit the potential return on the investment required to advance a development program for this indication.

Arena expects to discuss its new strategic focus and cost reduction plan during its upcoming quarterly conference call.

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